Earlier this year, when the British government’s assessments of the economic impact of Brexit were finally published, they revealed that the north-east of England was at risk of the deepest damage. Although the region still bears scars from the decline of heavy industry in the 1980s, today the north-east is the only part of Britain that exports more to European countries than it imports. And, amid the region’s new and rebuilt industries, such as pharmaceuticals, the most significant engine of recovery has been Nissan, the Japanese carmaker, which is housed in a giant factory complex just off the A19 at Washington, near Sunderland.

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The plant was opened with great ceremony by Margaret Thatcher in 1986. Sharon Hodgson, now Labour MP for Washington and Sunderland West, which includes the plant, remembers that as a teenager, she was amazed when it was announced that Nissan would be setting up there. “Growing up in the north-east then, we had seen everything close – the mines, the shipyards, so many people put out of work. It was the cruellest, most awful time,” she said. “As a young woman, I remember the feeling of hope and optimism when Nissan came, the shock and surprise that we were actually going to get something.”

Since then, Nissan’s operation has expanded to cover a 800-acre site, running two production lines that produce 519,000 cars per year – about 55% for export to other EU countries. According to the company’s most recent annual report, for 2016-17, Nissan’s UK operation generated £6.4bn from sales, employed 7,755 people and paid these workers, mostly living in the north-east, £427m in wages. Companies supplying parts to Nissan employ a further 30,000 people across Britain.

“Nissan hasn’t been able to bring full recovery to the area; decline and deprivation are still prevalent,” said Hodgson. “But they are a massive employer, providing good jobs, including the supply chain which is so important. You have father and son working there now, a real sense of pride, and that productivity and quality is why it has been so successful.”

Yet today, there is serious concern at Nissan that Brexit threatens to damage its operation in Sunderland. The clearest explanation of how its UK business depends on EU membership was provided in February 2017 by Nissan executive Colin Lawther, appearing before parliament’s international trade committee. Lawther, a chemist by training, began his career with Nissan in 1985, as one of the key workers responsible for setting up the laboratory operation in the Sunderland plant. He went on to become Nissan Europe’s senior vice-president for manufacturing, purchasing and supply-chain management, before retiring earlier this year.

To produce as many cars as it does, Lawther explained, Nissan Sunderland needs to receive and fit 5m parts each day. Of these parts, 85% are imported, mainly from Europe. The plant holds only enough parts for half a day’s production, because it is expensive to store them, so the whole multi-billion pound operation relies on these millions of parts arriving daily with no barriers or customs delays.

Because Britain is currently part of the EU, this is a straightforward process. Each of the 28 EU member states belongs to the single market, which has been designed to facilitate trade by removing tariffs, as well as other trade and customs barriers. Rather than having 28 different industrial safety regulations, for instance, there is a single set of regulations that applies across all member states. The single market means trade between 28 different countries is free, fast and “frictionless”, just as it would be if the EU were one very large country. “Frictionless trade has enabled the growth that has seen our Sunderland plant become the biggest factory in the history of the UK car industry, exporting more than half of its production to the EU,” Nissan said, in a statement for this article.

“We build two cars every minute,” Lawther told the committee in 2017. “So you have 5m parts coming in every day, and you have half a day’s worth of stock. Any disruption to that supply chain is a complete disaster.

“We are talking about plant efficiency, downtime efficiency – to be world-class, we have to be 97% efficient. We are talking about two, three, four, six minutes a day of downtime on the production line. More than that is a disaster. If you start talking about interruption of supply of parts for hours, that is completely off the scale.”

If Britain leaves the EU without securing an agreement for continued frictionless trade – the “hard Brexit” outcome – Britain’s trading relationships would be regulated by World Trade Organisation rules, which do not allow for agreed product standards, and therefore will require customs checks at the borders with Europe. The rules also impose tariffs, including 10% on cars, 4.5% on car parts. For Nissan’s Sunderland operation, Lawther told the committee, as well as likely new delays at the borders, the impact of tariffs will add up to around £500m per year of additional costs, which would be “pretty disastrous”.

According to the government’s assessments, published in March, a “hard Brexit” would lead to a 16% economic decline in the north-east. London, by contrast, with its much more varied economy and the financial power of the City, would suffer a drop of only 3%.

The key figure in deciding the fate of Nissan’s operation in Sunderland is Carlos Ghosn, a global business executive born in Brazil to Lebanese immigrant parents, then educated in France. Ghosn, who became known as “le cost killer” after he restored the fortunes of Renault in the 1990s with his relentless efficiency drives, is not only chairman of Nissan, but also chairman of Renault and Mitsubishi, and of the Renault-Nissan-Mitsubishi Alliance that allows the three companies to work together to save costs. Renault owns 43.4% of Nissan, which in turn has bought a 15% stake in Renault, and 34% of Mitsubishi.

Since the vote to leave the EU, which was a shock to Nissan and other carmaking companies, Ghosn has consistently emphasised two main points in his occasional public statements. First, Nissan will not make further investments when they do not know what Britain’s future trading arrangements will be. Second, if leaving the EU significantly raises costs and trade barriers, Nissan will consider reducing its British operations. Sunderland is by far Nissan’s largest European plant, but the company has other factories in Europe. The current priority for the alliance, overseen by Ghosn, is a €10bn (£8.9bn) global cost-cutting programme to be implemented by 2022. It is increasingly moving towards a standard manufacturing method that can make both Renault and Nissan models. Already the Renault factories at Flins and Le Mans in France are making the Nissan Micra, in huge numbers.

Although it has invested £4bn since 1986 to make Sunderland its European base, Ghosn has said it will be reviewed if Britain becomes uncompetitive due to Brexit. “I don’t think any company can maintain its activity if it is not competitive,” Ghosn said in June. “If competitiveness is not maintained, little by little you’re going to have a decline. It may take some time, but you’re going to have a decline.”

Nissan’s Washington car plant does not look grand; it is a no-frills operation. Beyond the security gates and high railings, which are punctuated with turnstiles where the workers enter, the vast site consists of blank, imposing production sheds and basic office blocks. The main reception is a bare, functional lobby that has the feel of a 1980s school entrance. There, on a shelf, sit two Japanese Daruma dolls, which by tradition had their first eye painted – by Prince Charles and his then wife, Diana – when construction began in 1984, and the second – by Margaret Thatcher – when the plant opened on 8 September 1986.

In her landmark speech that day, Thatcher portrayed Nissan’s arrival as a British victory over the rest of Europe. “It was confirmation from Nissan,” she said, “that within the whole of Europe, the United Kingdom was the most attractive country – politically and economically – for large-scale investment.”

Facebook Twitter Pinterest Margaret Thatcher painting the eye of the Daruma doll at the opening of the Nissan plant in 1986. Photograph: Alamy

Thatcher did not mention that Britain’s membership of the European Community (as the EU was then known) was crucial to Nissan’s decision. Yet she was fully aware of it, as were other government ministers. In a meticulously researched history of the plant’s funding via EU and UK government public money since the 1980s – adding up to almost £800m – Kevin Farnsworth of the University of York and his co-authors Nicki Lisa Cole and Mickey Conn (no relation) unearthed a 1980 memo to Thatcher from her industry minister, Keith Joseph. Nissan had by then decided to build a European plant in Britain, and Joseph explained:

“The deal [is] tangible evidence of the benefits to the UK of membership of the European Community; Nissan [has] chosen the United Kingdom because it [gives] them access to the whole European market. If we were outside the community, it is very unlikely that Nissan would have given the United Kingdom serious consideration as a base for this substantial investment.”

At that time, the north-east’s traditional industries were already being closed down. In 1980, British Steel shut its plant at Consett, putting 4,500 people out of work, a still powerfully remembered devastation. Shipbuilding on the river Tyne had long been declining and was parched of investment. Ashington, Easington and other communities built around coal, including Wearmouth colliery in Sunderland, were to suffer the agonising deprivations and defeat of the 1984-85 miners’ strike, which was called to fight closures. In 1992, Michael Heseltine, then president of the board of trade, would announce that 31 of the country’s remaining 50 pits would close, cutting 30,000 jobs.

When I spoke to Heseltine for this article, I asked if he conceded that his government was too brutal in these mass closures of longstanding industries. He reflected for a moment, then replied: “Probably it was too unthinking.” He said he regrets that there was no considered policy to improve these industries – through better management, company reforms and longer-term investment. “Unlike Germany, Japan, France, now China, there was never any stable industrial strategy. It was much easier to say ‘let the market rip’,” he said.

Against that landscape of collapses, Heseltine recalled the efforts to bring Nissan and other Japanese companies to Britain: “We were looking to attract anything that would help the economy. And it was a central part of the attraction to the Japanese that we were in the European Union.” The German and French governments were more protective of their own industries, Heseltine said, and the UK saw Japanese investment as an opportunity to get into the European market. Thatcher’s newly restrictive trade-union laws, which had been bitterly opposed by unions, were also part of her government’s pitch: that workers would be less able to strike and easier to lay off than in other European countries. The Washington plant has, however, always been strongly unionised.

For the Japanese companies, Heseltine said, the UK was the “soft underbelly” of Europe, a way in. Shinichi Iida, minister for public diplomacy and media at the Japanese embassy in London, confirmed that Japanese companies were courted by Thatcher’s government, telling me that many Japanese companies “have a strong sense that they came here at the invitation of the UK at that time”. In 1989, two other major Japanese car manufacturers followed Nissan’s lead: Honda, which now makes models of the Civic for export, about a third to the EU, from its factory in Swindon, and Toyota, which describes its car plant at Burnaston, near Derby, and its engine factory in Deeside, north Wales, as “European production centres”.

The English language was a big draw to the UK for Japanese manufacturing companies, as was its tradition of research and development, and “the very strict and open legal system”, Iida said – but it was “quite essential” that the UK was “a gateway to Europe”. Sir Ian Gibson, who was recruited by Nissan from Ford in 1984 to establish and run the Washington plant, confirms that: “The whole premise of the investment was that it was a European base; there would be free access to the European market.”

Ged Parker, who was on the negotiating team for the local regeneration authority, recalled their pitch to Nissan. They had a huge site available on an old airfield, the former RAF Usworth; they had the north-east’s industrial tradition and experienced workforce; there was proximity to the A19, the A1, Newcastle airport and – most crucially – the ports on the Tyne, Tees and Wear for shipping parts and finished cars to and from Europe.

The north of England development council had hired a representative in Japan, Ken Oshima, to drum up business, and Parker remembers the enthusiasm of the visiting Nissan executives. “The delegation were engineers – they were technical people and they had a reverence for British industry.” They could also see that the area was able to complete major construction projects; Washington new town had just been built, a planned layout of new housing, industrial estates and shops, near historic Washington village, where the first US president George Washington had his family roots.

The team deployed an array of winning tactics to impress Nissan. “The proposal document was the first we ever did on a word processor,” Parker said. The authority had bought two computers just a few weeks before Nissan’s visit. “It was leading-edge technology then.”

Crucial, though, were huge grants of public money, provided by the UK because the north-east was classified as a special development area, in need of investment. According to Farnsworth, by 1984 the government had pledged £112m from the regional development and selective financial assistance schemes, to secure and prepare the site for Nissan’s investment. The airfield was classed as agricultural land, and sold at a heavy discount.

On 30 March 1984, Nissan finally signed the agreement to invest in Washington. “It was an unbelievable feeling,” said Parker. “It was a career high for me. The north-east has always felt hard done by, and it almost changed morale overnight. What Nissan has done since, expanded so much, particularly in recent years, dragged more industry up here, spread good practice, has been huge for the region.”

The first model made at the plant in 1986, when it employed 430 people, was the Nissan Bluebird. Gibson said they began with a target of 24,000 cars a year. The Primera model replaced the Bluebird in 1990, and two years later, the plant began to make a second model as well, the Micra. By 2000, the plant was producing three models – and a total of 300,000 cars each year.

Although the financial crisis hurt Nissan and 1,200 jobs were axed in January 2009, the British plant’s fortunes recovered more quickly than others. The Juke, Leaf, Infiniti and Qashqai models were all commissioned at Washington from 2010 onwards, attracting more multi-million pound investment in plant and machinery by Nissan, and a new round of expansion.

Facebook Twitter Pinterest Nissan workers prepare doors for the Qashqai car in Sunderland. Photograph: Reuters

When Nissan needs to decide on new investments, such as where new models are to be built, individual plants mount competing internal bids to the main board. “The plants with the best claim get the investment,” Gibson explained. “And the ones with the best claim have the least friction and risk. Sunderland, for a long time, was the best claim.”

Inside the basic, shed-like structure that houses the production lines is dizzyingly intricate, hugely expensive technology geared towards the “just in time” assembly of a car, mostly Qashqais, every minute. One of the Unite officials described the job on the line as “very hard, physically demanding”, and it looks it. The workers, mostly men, are on their feet throughout an eight-hour shift, tightly focused on machine-fitting engines, doors, dashboards and windscreens to the car bodies that come along the line each minute. Overhead, another line is sending down finished wheels, to be attached at the end of the process. Another team carries out rapid tests on the cars, then transporters take them out and to the port.

The Sunderland factory does not go in much for the modern trend of decorating the workers’ areas with ambient colours or motivational slogans, but there is one small sign next to the production lines. It says: “Nissan Sunderland Plant: SECOND TO NONE.”

In the months before the EU referendum, the Labour party’s official remain campaign, led by the former home secretary Alan Johnson, approached Nissan to ask if it could stage its north-east launch event at the Washington plant. The politicians wanted to showcase an economic, industrial and employment success that had clearly been built on EU membership.

Nissan declined. Despite the impact Brexit was likely to have on their businesses, senior executives at most major companies took the view that it was unlikely voters would decide to leave, and there was little to be gained by being too forthright on a political issue. When Nissan finally did make a statement, it was an exercise in restraint. “Our preference,” it said, “is, of course, that the UK stays within Europe – it makes the most sense for jobs, trade and costs. For us a position of stability is more positive than a collection of unknowns. While we remain committed to our existing investment decisions, we will not speculate on the outcome nor what would happen in either scenario.”

Facebook Twitter Pinterest Nissan Qashqais and Leafs being inspected at the port of Tyne before export. Photograph: Bloomberg via Getty

Unite also told its members that the union favoured remaining in the EU. “The damage Brexit can do is a massive concern, and we did campaign to remain,” says Tony Burke, Unite’s assistant general secretary with responsibility for manufacturing. One Unite official at the plant, who did not want to be named due to the sensitivity, still, of talking about Brexit, said he felt Nissan’s statement was “very neutral” and did not communicate to the workers how much was at stake. He said they did their best with Unite’s message, but it was “just one voice, one hit, in months of hysteria ramped up by the media, particularly about hostility to immigrants. That’s what people were listening to.”

Politically, Sunderland is overwhelmingly Labour: its three constituency MPs all represent the party, and in 2016, Labour won 67 of the 75 seats on Sunderland city council. The MPs and council campaigned for Britain to remain in the EU, but on the doorsteps, they found that people were planning to vote leave in large numbers.

In the referendum, 61% of Sunderland’s voters chose leave. When I visited the plant recently, I talked to several workers as they came off a shift. Most had voted leave. One young man, 24, who, like the others I spoke to, did not want to be named, said he had voted remain because he preferred stability and he “thought we’re fine as we are”, but that older workers around him had voted leave. “They said that they didn’t see a change from before and after we joined the EU, and some said they didn’t like the EU making rules for us.”

An older man, 55, pointed to one of the huge sheds behind us and said, like others, that Nissan’s multi-million pound investment in it shows the Sunderland plant is secure. He said he had voted leave to stop immigration, “EU interference”, and because the north-east gets “bugger all money” from the EU.

In fact, after Cornwall, the north-east receives England’s second-highest amount of EU structural funding proportionate to its population, according to a report compiled before the referendum for Sunderland’s public and private sector partnership, the Economic Leadership Board. The current round of EU funding, being managed by the region’s local enterprise partnership, is £437m between 2014 and 2020. Nissan itself, according to Farnsworth’s research, has received £450m in loans from the European Investment Bank, and £347m in grants and other public funding, from the UK and EU.

Another Nissan worker, 63, sitting on a barrier waiting for his lift home, said he had voted leave, like many of his colleagues, because he was “sick of the EU deciding our laws”. I asked him if he accepted that leaving was damaging to the car industry, and to Nissan. He did, he replied, then smiled, and said that would still not prompt him to change his mind.

Since the referendum, Nissan’s chairman, Ghosn, has regularly made public warnings that the operations in Sunderland will be reduced over the long term if Brexit makes the UK uncompetitive. Gibson says Britain’s lack of preparation and chaotic political process is creating “a terrible impression” with the Japanese.

Gibson knows the company intimately. After helping to establish the Sunderland plant, he went on to become president of Nissan Europe, and the first European to join the main Nissan board in Japan. “Of course, it is realistic that Nissan could stop investing in the plant; it’s the most likely outcome,” he said. “Now it is a three-company alliance; there are lots of Renault plants screaming out for future models, and Nissan plants in Spain. Why go to Sunderland, which will have more frictions and risk, and be isolated?”

Facebook Twitter Pinterest Carlos Ghosn, chair of the Nissan, Renault and Mitsubishi alliance. Photograph: Bloomberg via Getty

During his time at Nissan – he left in 2001, after 17 years – Gibson was struck by the way Japanese business culture focused single-mindedly on careful scrutiny of the data. “They have a very rational decision-making culture,” he said. “They examine the evidence, and have a very tough debate to reach a rational conclusion.” Iida, the Japanese embassy minister, agreed with Gibson’s assessment: “It takes time for them to take a decision, but once they do, they simply don’t waver it so easily.”

Within the car industry there is exasperation, and even disdain, for the pro-Brexit argument that British-based companies will be freed from ties with the EU to “go global”. Nissan and the other major manufacturers, including suppliers, are already global; they have huge plants in the US, China, Japan, Mexico, Brazil, Argentina, India and Russia. The Sunderland plant was allocated one model, the Infiniti, for export to the US, and sells some other cars around the world, but as Ghosn has emphasised, the plant is there principally to serve Europe, not to ship expensively to other continents where Nissan already has plants. Car manufacturers locate a factory in one country to serve that geographical region; Ghosn has consistently referred to Nissan’s Sunderland plant as “a European investment based in the UK”.

In September 2016, Ghosn suggested that the company’s plan to select Sunderland as the European plant to assemble its new Qashqai and X-Trail models was at risk following the referendum, and stated that the government needed to provide “commitments for compensation” if Brexit increased costs. In response, the government scurried to reassure Nissan. May met Ghosn personally, and the business secretary, Greg Clark, flew to Japan to meet senior executives. There then followed a period of correspondence that has still not been made public.

Following this government effort, on 27 October Nissan’s global headquarters in Yokohama announced that it would indeed build its new Qashqai and X-Trail models in England, “securing and sustaining the jobs of more than 7,000 workers at the [Sunderland] plant”.

Nissan has since insisted that Ghosn’s call for “compensation” was misunderstood, and was never a request for direct subsidy. However, the government has allocated considerable further UK and EU funding that has had the effect of helping Nissan. One of Nissan’s priorities, emphasised by Colin Lawther in his evidence in parliament, has been to bring more suppliers to the north-east, saving the company costs of importing and transport. In January 2017, only a few months after its intense period of correspondence with Nissan, £41m of EU funding was allocated by the north-east local enterprise partnership towards the construction of a new international advanced manufacturing park (IAMP), across the road from the Washington plant. Nissan suppliers are planned to locate on the site, where initial construction began in August.

That grant accounted for more than 80% of the £50m EU funding the local enterprise partnership had to spend in that round, so other regional infrastructure projects lost out. The chair, Andrew Hodgson, said he has never asked to see the exchange of letters between Nissan and the government, but that: “It was very clear, from a north-east perspective, we needed to invest in the IAMP.”

In March 2017, the BBC managed to uncover a small part of the correspondence between Nissan and the government. Paul Willcox, then chair of Nissan Europe, had proposed the need for more investment in electric vehicles, of which Nissan’s Leaf model is a market leader. Soon after the exchange of letters, the government announced that it would be making a multi-million pound investment in more charging points and other incentives to develop electric cars. Clark’s department for business, energy and industrial strategy has said that commitment followed general policy and was not specific to helping Nissan.

Farnsworth, the University of York academic who has researched the public funding for Nissan in the UK, suggests that Brexit is already leading the British government to be defensive, desperate to keep the investment the country already has. Brexit, his report says, “gives Nissan nearly unprecedented bargaining power with the UK government. These circumstances put the government in the position of having to give Nissan exactly what it wants in order for the company to remain in the UK.”

Despite the government’s efforts to reassure Nissan, Ghosn has repeated warnings that further investment decisions are on hold. It was in June, speaking to the BBC, that he warned of gradual decline if competitiveness is damaged. “So far we have absolutely no clue how this is going to end up,” he also said. “We don’t want to take any decisions in the dark. We don’t want to take any decisions we might regret in future”.

In their statement for this article, Nissan, still quite restrained, nevertheless echoed Ghosn’s warning. “Today we are among those companies with major investments in the UK who are still waiting for clarity on what the future trading relationship between the UK and the EU will look like,” it said. “As a sudden change from those rules to the rules of the WTO will have serious implications for British industry, we urge UK and EU negotiators to work collaboratively towards an orderly, balanced Brexit that will continue to encourage mutually beneficial trade.”

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Iida, at the Japanese embassy, said the priority is to avoid a hard Brexit: “Japanese companies have been seriously taking risk-hedge measures,” he said. “For example, Japanese financial institutions have already submitted business applications to cities such as Frankfurt and Amsterdam, and Japanese manufacturing companies are very quietly holding off their future investment plans.”

Since the referendum, and particularly since the publication of the government’s impact assessments earlier this year, James Ramsbotham, chief executive of the north-east chamber of commerce since 2006, has been voicing increasingly urgent warnings about the threat to the region’s economy. None of the government’s responses, or its conduct of the negotiations since, he says, have reassured him.

When I told him that Michael Heseltine had reflected on the 1980s closures of the north-east’s coal mines and heavy industry as “too unthinking”, Ramsbotham instinctively drew a parallel with Brexit: “Aren’t we in danger of doing the same unthinking thing now?” he responded. “Delivering another potentially catastrophic shock to the economy, without sufficient thinking, planning or foresight?”

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