Carmaker will not build new X-Trail in UK, saying uncertainty about future is affecting firms

Nissan has confirmed it is abandoning plans to build a new model of one of its flagship vehicles at its Sunderland plant, as it warned that uncertainty over Brexit was affecting businesses.

The Japanese car manufacturer announced in 2016 it would be making the new version of the X-Trail SUV at the factory in north-east England after receiving assurances about Brexit from the government, but on Sunday it said it would be produced in Japan.

Nissan said it had taken the decision “for business reasons” but warned that Brexit was having an impact, saying: “The continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future.”

It acknowledged in a letter to workers: “Today’s announcement will be interpreted by a lot of people as a decision related to Brexit.” The X-Trail is produced in Japan currently and Nissan said keeping production there would reduce “upfront investment costs”. The slump in the European diesel car market also played a role in the decision, with the Sunderland plant originally earmarked for the diesel version of the X-Trail.

Greg Clark, the business secretary, made no attempt to hide his disappointment at Nissan’s decision and said it was not surprising that business were holding back on spending decisions given the ongoing political impasse over Brexit.

“People are keen to invest but all motor companies and others across the economy point to the fact they don’t know what our trading relationship will be with our most important trading partner, and that is a source of uncertainty they want resolved and I want it resolved too, because it is hampering investment that would otherwise be made,” Clark said.

The minister hopes that Nissan’s announcement will help concentrate minds in cabinet and Westminster, and believes MPs in his own party and elsewhere will need to switch to supporting Theresa May’s Brexit deal to avoid similar decisions being taken by other multinational companies shortly.

The Labour leader, Jeremy Corbyn, said: “The Conservatives’ botched negotiations and threat of a no-deal Brexit is causing uncertainty and damaging Britain’s economy.” The party added it would press the government to spell out in detail what Brexit reassurances May had given the carmaker in 2016, when she met its former chief executive Carlos Ghosn before the original decision to manufacture the X-Trail in Sunderland. At the time the government said the assurances covered research and development, training and supporting the local supply chain.

Clark will give a statement about Nissan in the House of Commons on Monday, although a government insider added: “There’s no conspiracy about the reassurances; if they were any good, they’d have worked”.

Sunderland voted 61% to leave, although several of the MPs in the north-east want the UK to stay in the European Union. Phil Wilson, the Labour MP for nearby Sedgefield, said that Nissan had originally invested in the UK because “we were in the single market, the customs union and the EU”. He added: “If companies like this are starting to thing twice in investing in Sunderland and in the UK, it could have a significant downside for the economy on this area,” which he described as “the equivalent of when the collieries closed in the 1980s”.

Calling the decision “very disappointing news” for Sunderland and the north-east”, the Unite union said it blamed Brexit uncertainty for the decision, along with the government’s “mishandling” of the transition away from diesel. It expected the company “to work with us to ensure full preparations for Brexit in which jobs and investment are prioritised”.

Facebook Twitter Pinterest The then CEO of Nissan, Carlos Ghosn, leaves 10 Downing Street after meeting Theresa May to seek Brexit assurances in 2016. Photograph: Hannah Mckay/Reuters

Nissan said plans over other future models destined for the Sunderland plant – the next-generation Juke and Qashqai – were unaffected by the announcement.

The company’s decision will fuel concern about the economic impact of Brexit, particularly on deprived parts of the country – less than eight weeks before the UK is due to leave the European Union – with some global companies appearing reluctant to make further investment.

The announcement came days after figures from the Society of Motor Manufacturers and Traders (SMMT) revealed that British car production had dropped to a five-year low in 2018, as manufacturers warned that fears of a no-deal Brexit had prompted a fall in new investment.

Nissan employs about 6,700 staff at the Sunderland site, producing 2,000 cars a day. It is Britain’s biggest car plant, making it one of the region’s key employers. The opening of the Nissan plant in the mid-1980s marked the revival of a UK car industry that makes some of the world’s most renowned brands, including Mini, Jaguar Land Rover, Toyota, Honda and Bentley.

Since the plans were linked to greater investment, the move is not expected to have a significant impact on jobs, although Unite’s assistant general secretary, Steve Turner, referred to hundreds of new jobs and apprenticeships being lost because of the move.

Labour’s Bridget Phillipson, the MP for Houghton and Sunderland South, said the announcement “is the clearest signal yet of the damage being caused to the UK car industry by the uncertainty around Brexit. I fear this announcement is only the beginning and it is working people who will suffer the consequences.”

The MP for Sunderland Central, Labour’s Julie Elliott, said tens of thousands of people depended on Nissan for their livelihoods – both directly and through the supply chain. She said: “The production of the X-Trail would have created hundreds of much-needed extra jobs in the future. Sadly, any loss of future production at the plant makes it less stable.”

Rebecca Long-Bailey, the shadow business secretary, said: “The government’s chaotic handling of Brexit has been the root cause of business uncertainty. There are serious questions that the government must now answer on Monday, not least what was in the secret Brexit deal it issued to Nissan and why this was no longer good enough.”

Nissan said the company had decided to “optimise its investments in Europe” by consolidating X-Trail production at its Kyushu plant in Japan, which is the model’s global production hub.

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Hideyuki Sakamoto, Nissan’s executive vice-president for manufacturing and supply chain management, said: “A model like X-Trail is manufactured in multiple locations globally and can therefore be re-evaluated based on changes to the business environment. As always, Nissan has to make optimal use of its global investments for the benefits of its customers.”

Gianluca de Ficchy, Nissan Europe’s chairman, said that with the X-Trail already manufactured in Japan, “we can reduce our upfront investment costs”.

He added: “We appreciate this will be disappointing for our UK team and partners. Our workforce in Sunderland has our full confidence and will continue to benefit from the investment planned for Juke and Qashqai.”

Other Nissan models built at the site include electric car the Leaf.