Nissan suggested before Brexit vote it would move production out of UK if no tariff protection given, says Anna Soubry

A former business minister has said that Nissan had previously suggested it could move production to France if it was not protected from trade tariffs.

Anna Soubry said that No 10 must have privately told Nissan that Britain was remaining in the EU customs union or promised mitigation against any future tariffs before the car firm announced plans to build two new models in the UK.

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Greg Clark, the current business secretary, has insisted that no financial compensation was offered during numerous discussions with Nissan, which allowed the Japanese carmaker to commit to building its new Qashqai and X-Trail vehicles at its Sunderland plant.

It is understood that the government provided a “letter of comfort” to Nissan promising that the UK car industry would remain competitive after Brexit. Ministers, however, would neither confirm nor deny whether such a letter had been sent.

Sources said the letter was understood to give an undertaking that Nissan would not face “additional costs” after the UK leaves the EU, implying that the taxpayer could be liable for subsidising the car industry in the event of tariffs being imposed on automotive exports.

Downing Street also declined to say if more specific informal promises had been offered to Nissan and by implication to other carmakers, but industry sources have said they have been reassured by the government that they would not suffer from tariffs after the UK leaves the EU.

No 10 is under pressure to publish the letter and Clark is to be called before the Commons business committee to explain what he has offered in the way of support to Nissan.

What is the customs union? The European Union is a customs union. It allows free trade between countries inside it and allows imports in to the area by setting common tariffs. The area does not just include EU members. For instance, Turkey is part of the customs union for manufactured goods but not services or agriculture. The single market involves deeper integration of free movement of people, goods, services and money. This means laws need to be aligned. Some countries have access to the single market without being members of the EU’s customs union.

Soubry, who was a senior minister in the business department until July, said the carmaker had privately suggested to her in the past it would move production to France if it did not have a guarantee that it would be protected from tariffs or if the government did not do “something to mitigate the damage of tariffs”.



“They didn’t give the detail of what they wanted, they made it very clear that without a guarantee that they would not be subject to tariffs or if they were subject to tariffs the government would do something to mitigate the damage of tariffs … that without that, they told me, my understanding actually was that they would go to Renault because they clearly had the capacity there,” she said. The Japanese car company has a strategic partnership with the French manufacturer.

On the assurances that helped Nissan decide, Soubry told the BBC: “I don’t know what it is but I would be very surprised if there hasn’t been some sort of guarantee to mitigate any tariffs should they be imposed.”

She continued: “I can assure you we were looking at underwriting any tariffs should that be imposed upon us as we leave the EU. So that’s what we were looking at and we were prepared to do. So I don’t know what’s changed in the change of government.”

Vince Cable, who was business secretary during the coalition, also said the carmaker must have been offered “very, very substantial” promises.

He told the Guardian: “I was involved in discussions with Nissan in their last big round of investment decisions. Even under the coalition they were toying with doing it in France.

“I find it impossible to believe they would go ahead without some pretty copper-bottomed promises. These guys do not go making decisions on the basis of vague assurances. That is not the way they operate.

“The only way these big supply chain companies are going to commit themselves to Britain – and Nissan is the biggest – is that if they give them guarantees they are not going to be caught up in rules of origin problems, which is what happens if you leave the customs union.”

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A Downing Street source said whether the UK remained a member of customs union was still one of the “live issues” that had yet to be settled four months on from the Brexit vote.

But Cable, who lost his seat at the last election, said the only alternative to staying in the customs union would be a specific sector agreement for the automotive industry, which the EU would be unlikely to want to negotiate.



“I cannot see that happening,” he said on Friday. “Why would the EU want to do that? The same problems arise for aerospace, for pharmaceuticals. GSK yesterday was worrying about their supply chain. The only way to make the promise stick is to stay in the customs union.”

The automotive industry and Japanese government have for months been highlighting the risks of Brexit for carmakers, including more customs checks and tariffs.

Lord Bridges of Headley, a Brexit minister, told a Lords committee this week he was well aware that the customs union and the need for transitional arrangements with the EU to stop tariffs being suddenly imposed were important issues for the industry.



“We do understand the complexities for the car industry. All those things are being fed into the deliberations,” he added.

Nissan has also been asking the government for lower energy costs. The Guardian understands the company is considering seeking permission to build a gas power station to provide its own electricity. The 10 wind turbines and a solar panel farm it already has onlyprovide 7% of the Sunderland plant’s electricity needs.

David Davis, the Brexit secretary, has previously mooted the possibility of financial support for car manufacturers that stops short of directly offsetting tariffs should the UK fail to avoid their imposition when it leaves the EU.

“People seem to forget that the British government will be in receipt of over £2bn of levies on EU cars alone,” he said in July. “There is nothing to stop us supporting our indigenous car industry to make it more competitive if we so chose.

“WTO [World Trade Organisation] rules would not allow us to explicitly offset the levies charged, but we could do a great deal to support the industry.

“Research support, investment tax breaks, lower vehicle taxes – there are a whole range of possibilities to protect the industry.”

There is now likely to be pressure on No 10 for similar assurances to be given to other industries, including aerospace, pharmaceuticals and freight.

Clark is to meet Hitachi, which opened an £82m train manufacturing facility in County Durham in 2015 and had previously said the “future investment case” for Britain looked very different if the country was outside the EU.

On Friday, a spokesman for the Japanese multinational said it had not received any assurances from ministers so far.

But he added: “While some matters will require adjustments based on economic agreements yet to be agreed – for example, tariffs on procurements in the UK from other countries and on exports from Japan, as well as the mobility of manpower within the European region – we expect that the British government will make every possible effort to minimise effects on the economy.”

There is concern that thousands of jobs are at risk at Vauxhall’s UK factories after the carmaker’s US owner warned this week that it could shut plants after taking a $400m (£330m) hit from the Brexit vote.

Vauxhall is to decide next year where it makes the new Astra, which is currently assembled at its Ellesmere Port plant in Cheshire, which has more than 2,000 employees. In total, Vauxhall employs 4,500 across its two plants and its warehouse and head office in Luton.

Prof David Bailey, of Aston University, said other carmarkers would become more vocal in their demands as big investment decisions neared.

“I did expect Nissan to build the Qashqai in the UK. That’s a big, efficient plant in Sunderland and they were well down the road to making the decision. The big questions are going to come at General Motors and Toyota – those are the plants that are more at risk,” said Bailey.

Vauxhall – a wholly owned subsidiaries of General Motors – declined to say if it would increase its lobbying of No 10 after the Nissan announcement.

But it pointed to a statement it released a day after the EU referendum that read: “Communication on the development of the future relationship with the EU should also be clear and transparent.”

A Vauxhall spokeswoman said it would not comment further on production in the UK until it understood more about government Brexit strategy.

Manufacturing and pharmaceutical trade bodies suggested they would not immediately be seeking their own “letters of comfort”.

A source at GlaxoSmithKline said the government was listening to the industry’s concerns and that it hoped it would find pragmatic solutions.