Nissan plans to turn its Sunderland car factory into one of the biggest car plants in the world, producing two new models, after winning “support and assurances” from Theresa May about Brexit. The agreement with the government will safeguard the future of more than 7,000 jobs and delivers what will be perceived as a major boost to the economy following the referendum.
However, the commitment from Nissan to stay in the UK immediately prompted a political row, with Downing Street forced to deny that it had offered the Japanese company a sweetheart deal.
The Guardian understands the government has privately told executives in the car industry that it is confident the sector can retain tariff-free access to the single market. The government and senior car executives believe the UK automotive industry is in a strong position when it comes to negotiations about leaving the EU because Britain imports more cars from Europe than it exports.
The Nissan announcement was made soon after 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%.
In a further boost, Toyota, which has a major factory in Derbyshire, also appeared to commit its future to the UK. Didier Leroy, the chief competitive officer and executive vice-president, said Brexit was not a reason to abandon its operations in the country and that he had “trust in the UK government that it will offer fair treatment” for companies when negotiating its exit from the EU.
Nissan has committed to building its new Qashqai and X-Trail models in Sunderland, potentially creating hundreds of new jobs. It will be the first time the X-Trail will be made outside Japan. Nissan also said it wants to develop Sunderland into a “super plant” that will build more than 600,000 cars a year.
The future of the Sunderland plant has been in doubt since the referendum. Carlos Ghosn, chief executive of Nissan, warned that the Japanese company could decide to build its next-generation models outside Britain if it did not receive compensation for any loss to competitiveness it suffered after Brexit.
May hailed Nissan’s decision as “fantastic news” and a vote of confidence in the UK. It is the first major investment decision in the automotive industry since the June referendum.
Although Ghosn said the government had offered “support and assurances”, Nissan and the government repeatedly refused to say what had been promised to the carmaker and whether any public money was involved, despite pressure from Labour.
A source close to Jaguar Land Rover, which employs more than 35,000 people in Britain and is the biggest carmaker in the country, said it was relaxed about Nissan’s deal and had also been “reassured” by the government about access to the free market during private discussions. “The government is fully aware of JLR’s plans. Discussions are taking place,” the source said.
Although Downing Street refused to reveal the details of its discussions with Nissan, it signalled that it had not made any declaration to the EU about a proposal to offer state aid. The prime minister’s deputy official spokesman said: “The assurances are that we will get the best possible deal. There was no special deal for Nissan.”
Asked whether Nissan had been promised that it would not face tariffs on its exports to Europe, he added: “I can’t be any clearer. The dialogue we’ve had with Nissan as we do with other companies is a reassurance that we are determined to get the British industrial sector the best possible deal. It is a reassurance. There is no deal. We have a dialogue with Nissan and many other companies.”
He declined to comment on whether the industry had been promised lower energy costs, which is another potential financial incentive for Nissan. Industry sources said the government could also provide subsidies towards training existing staff and hiring new workers.
Jeremy Corbyn, the Labour leader, said he was pleased there would be continued investment in Sunderland, but said the “concerns are still there” about any secret deal between the government and the Japanese company.
“If there are any inducements that have been offered, and quite obviously if you are offering big inducements to one industry or one manufacturer, then all the others will quite reasonably say: ‘Well, what about us?’” he said. “We are only a few months into Brexit and we don’t know what the terms of the agreement are between Nissan and the government.”
May met Ghosn at Downing Street for a private meeting earlier this month while Greg Clark, the business secretary, met company representatives on a recent trip to Japan. In an interview on BBC Radio 4’s World At One Clark declined six times to say what support had been offered to the company. “We have had, obviously, as you might imagine, lots of communication between us, but actually what it rests on is a very strong mutual confidence,” he said.
“There is no question of financial compensation over tariffs because we have said that what is necessary is that we are going to maintain the competitiveness of the sector, and we are going to get the best deal possible. We think that the mutual interest between our European neighbours and ourselves is very strong in this way.”
Colin Lawther, senior Nissan official for Europe, told the Guardian that there had been “no financial package outside the normal, in the public domain request, for grant support”.
He added: “It comes down to trust at the end of the day. We are confident the government is taking sufficient measures to make sure the whole of the automotive industry will be competitive at the end of the process”.
He said Nissan had stopped production lines at 11am in Sunderland to inform staff of their announcement.
One in three British cars are manufactured in Sunderland, where Nissan has invested more than £3.7bn since it opened the factory in 1986. More than 7,000 people are employed at the site, with a further 28,000 supply-chain jobs reliant on the factory, mostly in the north-east.
“Our dream is a 600,000 car super plant, there’s not many of those in the world,” Lawther said of Sunderland.
The news led to a split in Labour and the trade unions. Union leaders and local MPs such as Iain Wright praised the news while senior Labour figures such as John McDonnell, the shadow chancellor, criticised the government for a “chaotic” strategy.
“We know nothing about it,” McDonnell 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 government’s position on the single market has been unclear since May took over as prime minister. May has repeatedly said the UK wants to maintain as full and free access to the trading bloc as possible.
But neither No 10 nor the Treasury has ruled out the possibility that certain industries could face tariffs as a result of a post-Brexit deal with the EU or a reversion to World Trade Organisation rules. David Mundell, the Scottish secretary, confused matters further on Thursday by declaring: “If we are leaving the EU, we are leaving the single market.”