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Nissan has warned it could review its operations in Sunderland if the Government fails to secure a free trade deal after Brexit .

Colin Lawther, the senior vice president of the car company, said leaving the customs union would be a “disaster” for the firm.

He told MPs that falling back on World Trade Organisation (WTO) rules would cost the firm £500million a year in extra import and export duties and could see it have to scale back its production.

And he warned other car companies may not survive if Britain leaves the customs union.

The Government heralded Nissan’s decision to build its next generation of Qashqai models in Sunderland as evidence that Britain could flourish outside Brexit .

Mr Lawther said Nissan had made a 25-year investment in the plant and wanted to stay in the UK. He said there was nowhere else in Europe to build the Qashqai.

(Image: Getty)

But he warned that could change if Theresa May carried out her threat to walk away from talks if she could not strike a deal with the EU in Britain’s interests.

That would mean the UK falling back on WTO rules which would see firms pay a 10% tax on car exports to the EU countries.

An additional 10% tax would be "disastrous" for the company, Mr Lawther said.

“If anything materially changes we would review constantly. The big point for us is mainly the free trade agreement. That’s the big ticket item,” Mr Lawther told the International Trade select committee.

He added: “We would have to look at the degrees of change and adjust our business to take into account whatever this new trading platform would be.”

The car boss said the decision to expand in Sunderland was based on “a set of circumstances” at that point in time.

“As those circumstances change, and we wouldn’t wait until the end of the process, we will continually review the decisions that we take, based on anything that materially changes,” he told MPs.

Mrs May all but ruled out full membership of the customs union in the Lancaster House speech setting out her goals for Brexit in January.

(Image: Getty)

Mr Lawther bluntly spelled out the consequences of leaving the customs union, saying it would mean border checks on parts coming into the EU.

He said the Sunderland plant imported 5million parts a day and made two cars every minute.

He said any disruption to the supply chain caused by additional customs checks would be a “complete disaster.”

A 10% increase in import duties would cost the firm £500million a year in additional costs.

“Maybe we can survive that. Some of our competitors might not be able to survive,” he said,

Lib Dem leader Tim Farron said: “The promises Nissan got from the government clearly weren’t worth the paper they were written on.

“Even with the offer of funding and a special deal, Nissan has still said it will need to review its Sunderland plant in future.

“This is a damning indictment of this government’s hard Brexit plans which are putting thousands of jobs at risk.

“Secretive deals and taxpayer-funded bungs will not be enough to shelter our economy from a reckless exit from the Single Market.

“This shows yet again why we must give the British a say on the final Brexit deal.”

Asked about Nissan at the British Chambers of Commerce annual conference in central London, Business Secretary Greg Clark said: "One of our sources of strength in this country has been that we have in the automotive sector ... sectoral arrangements in which we jointly invested - the manufacturers, suppliers and the Government - in research and development programmes in creating institutions for training, providing skills.

"That is something that has been very successful in the automotive sector."

He added: "Any organisation in that sector is aware of the joint working that we have, and that's something to be very proud of."