We’ve been following Brexit on behalf of our clients quite closely as the posture and actions of the UK government over the next months will shape a new playing field for many businesses. It’s true that UK economic growth this last quarter held fairly strong but we must also note that figures were down from the previous quarter. The fact of the matter is that there will be some very fundamental decisions made in the remainder of 2016 and in 2017, first in political terms within the UK and then in negotiation with the EU – that will clearly be quite consequential to a wide range of businesses who trade within Europe.
With Nissan publically pressuring the UK Government for assurances as they contemplate where to expand production, it’s become very evident how messy this is. The headlines last week about Nissan ready to continue on and make their investment in Sunderland were helpful, but not conclusive. It’s good that the Government offered reassuring words about their intentions to maintain favorable trade status alongside the EU, but the proof is in pudding. Both the Government and Nissan got what they needed for this point in time, they bought time and acted positive. But Nissan can still shift its plans if things don’t go the way May/Clark described, we believe that they will if a “hard” Brexit begins to shape over the next months. They have options in Spain and potentially elsewhere. From the Government’s point of view, they managed to help create positive headlines while indicting that they won’t pick winners and losers in the auto sector. They also clearly said that each sector will be treated individually, anticipating that there will be varying degrees of challenge in the EU negotiations. More as it plays out……
Guardian Article: Carmaker announces major investment in Sunderland factory after confirming government support
Colin Lawther, a senior official for the carmaker, said there were ambitions to turn the factory into a “super plant” producing 600,000 cars a year and protecting the jobs of the local workforce and the thousands more who support the production across the UK.
The prime minister hailed the decision as a vote of confidence in Britain. “It is a recognition that the government is committed to creating and supporting the right conditions for the automotive industry so it continues to grow – now and in the future,” said Theresa May.
The announcement came as new figures showed the economy fared far better than expected in the immediate aftermath of the Brexit vote. In the first official verdict on how the economy has performed since Britain voted to leave the EU, the Office for National Statistics said GDP grew by 0.5% in the third quarter. This was down from 0.7% in the previous three months but well ahead of City forecasts of 0.3%.
Nissan’s chief executive, Carlos Ghosn, has been lobbying May’s government for guarantees after the 23 June referendum. He said on Thursday that government support and assurances had led to the decision to manufacture the Qashqai and X-Trail SUV models in Sunderland. The X-Trail is an unexpected addition.
He had previously said future investment in Britain’s biggest car factory depended on a guarantee of compensation if the UK struck a deal with European allies that led to tariffs on car exports.
Lawther, Nissan’s European senior vice president for manufacturing, purchasing, and supply chain management, said that the decision had been made after daily conversations with the government since the referendum.
“It comes down to trust at the end of the day,” Lawther said. “We are confident the government is taking sufficient measures to make sure the whole of the automative industry will be competitive at the end of the process”.
He said there had been “no financial package outside the normal, in the public domain request, for grant support”.
“We’ve ended up in a rosy pink scenario today,” said Lawther, who said production lines had been stopped at 11am to inform staff.
John McDonnell, Labour’s shadow chancellor, criticised the deal done as a “chaotic” strategy. In a speech where he had criticised the government for appearing to prioritise financial services over manufacturing and small businesses, McDonnell said there had been no public discussion of the deal hashed out for the carmaker.
“We know nothing about it,” he said. “Are they literally going to decide factory by factory which one gets support? We have to have a comprehensive plan, and this is chaos at the moment.
“We are trying to get a consensus and heal the divisions the referendum brought and we cannot do that with secret deals behind closed doors. It will divide our country once more.
“The first deal looked like it would be protecting financial services, paid for by others. And now with Nissan, other manufacturers are saying what are we going to get? We have to have a comprehensive plan. What we need is more openness and transparency and accountability.”
Labour’s mayor of London, Sadiq Khan, is scheduled to call on the government to prioritise the City’s EU passporting rights at a speech at the City of London Corporation’s annual dinner on Thursday night.
McDonnell said he was also determined to protect financial services but would not prioritise a “bankers’ Brexit” over other industries. “It sends out messages to the rest of our economy that special deals are being cooked up. We will fight for every job in financial services sector, but it cannot be done in a chaotic way.”
Unite, Britain’s largest union, called on the government to support other carmakers to ensure they continue to invest in the UK. Its assistant general secretary, Tony Burke, said: “Nissan’s decision is a massive vote of confidence in the skills and expertise of a world-class workforce and testament to their hard work which has made the Sunderland plant one of the most productive in the Nissan family.
“A source for decent jobs, skills and innovation, it is vital that the government supports the car industry and secures tariff-free access to the single market to ensure other manufacturers follow Nissan’s lead and invest in the UK car industry.”
Mike Hawes, who heads the Society of Motor Manufacturers and Traders, also called for more guarantees from the government. “We need government to provide public assurance to investors that our advantages will be maintained – namely, a competitive business environment, the ability to recruit talent from abroad and the continuation of all the benefits of the single market as we leave the EU.”
It produces half a million cars a year under the Juke, Qashqai and Leaf brands. One in three British cars are manufactured in Sunderland, where Nissan has invested more than £3.7bn to date.
“Our dream is a 600,00 car super plant, there’s not many of those in the world,” said Lawther.
Rumours have swirled that the discussions have also included the possibility of Nissan generating more power locally, but Lawther said “we are not talking about additional generation on site” beyond the 10 wind turbines already in place.
Production, he said, would continue beyond the three years it could take for Britain to leave the EU.
Lawther said: “The government has said it is working towards a competitive environment, targeting towards free trade.”
The Qashqai and Juke were designed at Nissan’s Paddington design centre in London. It also has an engineering centre in Cranfield, Bedfordshire, and a sales and marketing team in Maple Cross, Hertfordshire.
Also on Thursday, Nissan reported an 11% rise in global production in September to 485,154 cars – a record for the month. In the UK, it ramped up production by 6.6% to 50,133 cars, another record.
