Ross Clark

Nissan’s post-Brexit plan exposes the limits of Project Fear

Nissan's post-Brexit plan exposes the limits of Project Fear
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Brexit voters are, of course, mostly fools who don’t know what is good for them – in contrast to all those Remain voters with their degrees and analytical skills. But none are so dim-witted as those in Sunderland who, like turkeys voting for Christmas, chose a course of action which will inevitably lead to them losing their jobs at the city’s Nissan plant.

Or maybe not. It turns out that Sunderland’s Nissan workers might not be quite so stupid after all. It's been revealed that the company is looking at a scenario in which it would close its EU plants and transfer production to Sunderland instead, raising its UK output from 350,000 to 400,000 vehicles a year. The Micra, which is currently manufactured in a Renault plant in France, would move to Britain, while its van plant near Barcelona would be closed.

Nissan, quite reasonably, has been looking at what it would do in the event a trade deal fails. In common with other car manufacturers, the company currently relies on a complex supply chain which involves parts passing – tariff-free – backwards and forwards between Britain and the EU. It also exports a lot of its finished vehicles across borders. Such a business model faces disruption in the event of a failed trade deal – an outcome which, of course, neither the UK nor the EU wants.

Arch-Remainers were not wrong to pick up on this as a potential cost of Brexit. But their error has been to assume that a hard Brexit would involve production draining away from Britain and towards the EU. What they ignore is that Britain is not just a producer of cars, it is a very large market for them, too. Indeed, German car-makers have called Britain ‘Treasure Island’, as it is a particularly profitable market.

So what do you do if you currently make cars in Britain, some of which are sold here and some of which are sold in the EU? Do you shift production to the EU in order to avoid the tariffs you might have to pay on exports there? Or do you keep production in Britain, to avoid tariffs which would become payable on cars sold here? The advantage of doing the latter, as Nissan has twigged, is that the prices of many cars currently imported to Britain will rise if a trade deal fails. Cars made in Britain will therefore have a competitive advantage. Under Nissan’s scenario it would increase its share of the UK market from a current four per cent to as much as 20 per cent.

For the moment, this is only a scenario, and one which Nissan officially denies – although to judge by the confidence with which the Financial Times reports the story this morning it has come from deep inside the company. But it is a reminder that the boot is not on the EU’s foot when it comes to trade negotiations, however much Michel Barnier might like to assert it is. In common with Britain, the EU has much to lose from a failed trade deal, not least because it has a large surplus in trade in goods with Britain. That is why our own government is right to ramp up the rhetoric in trade negotiations and assert that no deal is a serious possibility.