The business secretary has been forced to admit the existence of a previously secret package of state aid to Nissan that could have been worth up to £80m had the carmaker gone ahead with plans to manufacture a new model X-Trail in Sunderland after Brexit.
Greg Clark released a letter dated October 2016 in which he pledged tens of millions of taxpayer support and promised the Japanese company it would not be “adversely affected” after the UK left the EU.
Yet, at the time the commitments were first made, Downing Street had said “there was no special deal for Nissan” and Clark refused six times to answer a question about what was on offer when interviewed on the BBC. He even appeared to suggest no money was involved. Asked on BBC One’s Question Time about the deal, he said: “There’s no chequebook. I don’t have a chequebook.”
Clark and the government had repeatedly refused to release the 2016 letter until the promises turned out to be worthless, because Nissan had abandoned its future investment plan, partly because of uncertainty over Brexit.
The four-page document, sent by Clark to Nissan’s then chief executive, Carlos Ghosn, committed the government to “a package of support in areas such as skills, R&D and innovation” which “could amount to additional support of up to £80m”.
The state aid package ultimately turned out to be worth £61m when it was formally awarded to Nissan in June 2018, a fact only acknowledged by Clark in a second letter sent on Monday to the Labour MP Rachel Reeves, who chairs the business select committee.
The 2016 letter promised Ghosn it would “be a critical priority of our negotiation to support UK car manufacturers and ensure that their ability to export to and from the EU is not adversely affected by the UK’s future relationship with the EU”.
Clark’s Brexit promise, however, could not be met because no deal has been struck with the European Union with less than two months to the scheduled March 29 exit date, causing mounting concern that the UK could crash out without agreeing a deal.
Nicky Morgan, who chairs the Treasury select committee, complained that MPs had not been informed about the deal with Nissan before Monday. She asked why her predecessor, Andrew Tyrie, had not been told about the package when he had asked what assurances had been provided to Nissan in 2016.
“If the government provided financial assistance to Nissan to persuade it to stay in Sunderland, it should set out what this support was and why it did not disclose it to my predecessor,” Morgan said.
Clark told MPs Nissan would have to reapply to the government for the financial support, which was offered on the basis that the carmaker would produce its Qashqai and X-Trail models in Sunderland. The company had only received £2.6m so far, he said.
The minister, however, sought to deflect the criticism of his handling of the Nissan affair by warning that a no-deal Brexit “would be ruinous for our prospects” and arguing that MPs should heed the company’s decision and support Theresa May’s Brexit deal.
“No-deal is fully acknowledged, certainly by me and the industry, as being ruinous for our prospects,” Clark told MPs in an unambiguous warning to hard Brexiters in his party. “But in order to avoid no-deal, we need to come to an agreement in this house.”
Clark is one of the strongest voices in cabinet against a no-deal Brexit, alongside Philip Hammond, the chancellor, and David Gauke, the justice secretary. But May has refused to rule it out as a bargaining position, even though talks with the EU are at an impasse.
The Nissan car plant in Sunderland, the biggest of its kind in the UK, employs 7,000 people and is one of the UK’s industrial success stories. It operates on the outskirts of a city where 61% voted for Brexit in the 2016 referendum.
There have been concerns about Nissan’s long-term investment plans since the Brexit vote, concerns exacerbated by a slump in demand for diesel vehicles. Vehicles using the fuel are facing tighter regulations across the EU after an emissions-cheating scandal at Volkswagen prompted intense scrutiny of diesel’s environmental impact.
Over the weekend, Nissan said it would no longer manufacture the new model X-Trail SUV in Sunderland, stopping a planned expansion. The company said “the continued uncertainty” over Brexit was one of the factors behind its decision.
No jobs were lost as a result of Nissan’s decision, but the investment in the X-Trail had been intended to create 741 new jobs.
Clark’s 2016 letter did not make any specific assurances about the UK’s future Brexit policy, although it did seek to provide general comfort to Ghosn and acknowledged his concern about the impact of changes in the terms of trade.
“We will continue to do everything we can to make it as easy and rewarding as possible for Nissan to invest,” Clark wrote. “I understand, of course, your worries now about uncertainties as the UK prepares to leave the EU. In particular, your fear that potential future trade arrangements could affect the business case for your investments.”
Nissan said it planned to consolidate all production of the X-Trail in its plant in Kyushu, Japan. Cars manufactured there will benefit from the recently completed free-trade agreement between the EU and Japan, which will mean all tariffs on cars are reduced to zero within seven years.
The shadow business secretary, Rebecca Long-Bailey, blamed the government’s handling of Brexit, arguing a tipping point had been reached. “Businesses are no longer speaking out simply to highlight the future dangers of a badly handled Brexit; they’re now losing confidence in the government and taking real action to protect their businesses,” Long-Bailey said.
Nissan has come under new leadership since Clark’s letter, after Ghosn was ousted following allegations brought by the company that he had under-reported income worth billions of yen. The Japanese businessman Hiroto Saikawa has taken over.
Nissan said the letter showed the company’s and the government’s “continued desire to support investment in the UK and maintain Sunderland as one of Nissan’s manufacturing hubs in Europe. The letter is no longer commercially sensitive as it contains nothing that hasn’t been disclosed publicly before, and the projects referenced in the letter have now changed.”