Nissan in Sunderland

Statement

My Lords, with the leave of the House I shall now repeat a Statement made by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy yesterday. The Statement is as follows:

“With permission, Mr Speaker, I would like to make a Statement about Nissan. The House should know the background to the decision the company announced yesterday. In July 2016, the allocation decision for the next model of the Nissan Qashqai was about to be made and it was set to be awarded to a European plant other than Sunderland. Nissan had located in Sunderland in 1986, having been persuaded by Mrs Thatcher that the combination of British engineering excellence and tariff-free access to the European Union made Britain an ideal location. So it proved, and the Sunderland plant grew to be the largest car plant in the history of Britain. The firm invested nearly £3.7 billion into it and currently employs over 7,000 people, with approximately another 35,000 in the supply chain.

The prospect of losing easy access to the EU market was the principal concern of the company at that time. It was clear that if Sunderland lost the Qashqai, which accounted for over half of its production, mostly for export, the medium and long-term prospects for a plant losing scale would be bleak. Determined not to see the 30-year success of this plant come to an end, we set out over the coming months a strong case for backing Sunderland. This centred on four areas, all of which were about highlighting the success of, and our strategy for, the British motor industry.

First, we would continue our successful and long-standing support for the competitiveness of the automotive sector, which has been available to all firms, for skills, training the local workforce and innovation. The regional growth fund has supported over 3,000 companies, large, medium and small, since 2010, with £2.6 billion of public support. Some £335 million has been invested in the automotive sector via the regional growth fund since 2010. All proposals are independently assessed by the Industrial Development Advisory Board and subject to UK and EU rules.

In 2016, Nissan initially considered applying for a total of up to £80 million in support over nine years for skills training, research and development and environmental improvements, and it was eventually awarded £61 million—around £7 million a year over nine years.

The second commitment was that we would work with the automotive sector to ensure that more of the supply chain could locate in the UK in close proximity to manufacturing sites. Since 2016, as many noble Lords know, our automotive sector deal established, with the industry, an ambitious programme to do that.

The third was that we would make a strong commitment to research and development, particularly to the development of new battery technology and its deployment, and in connected and autonomous vehicles. Our joint industry-government £1 billion advanced propulsion centre R&D programme, along with our £250 million Faraday challenge, is putting Britain at the leading edge of battery technology and manufacturing, and we have introduced test beds for autonomous vehicles across the country. Indeed, the longest autonomous car journey in the UK will take place in November this year from the Nissan site at Cranfield to its site in Sunderland, covering more than 200 miles on public roads.

Our fourth commitment was that in our negotiations to leave the EU we would always emphasise the strong common ground that exists between the UK and other EU member states and pursue a deal that could ensure free trade unencumbered by tariffs or other impediments.

These commitments proved persuasive, as they have subsequently for investments by Toyota at Burnaston, BMW Mini at Oxford and PSA at Luton. Indeed, every competitive allocation decision since 2016 in this industry has gone to Britain. Although discussions had been around the Qashqai, Nissan proposed towards the end of the discussions to add a further model, currently produced only in Japan—the X-Trail—to Sunderland. On 27 October 2016, Nissan announced that both the Qashqai and the X-Trail would be built in Sunderland, securing the plant’s future and adding 741 new jobs.

Last Friday I was informed by Nissan that following a global review of its capital investment, future capital was needed to accelerate the shift in Europe from conventional to lower-emission vehicles. The Qashqai and the Juke will in future have petrol and plug-in hybrid variants made in Sunderland, and as a result, more capital will be invested in Sunderland than was originally planned in 2016. However, this was accompanied by a decision to maintain Japan as the sole production location for the X-Trail model, rather than to establish a new production line in Europe. The consequence of this is that the existing jobs in Sunderland will be maintained by the increased investment, but the 741 additional jobs that would have been created in Sunderland will not now be available. Nissan confirmed that production of the new Qashqai, Juke and Leaf will continue at Sunderland, and that the decision has no implications for the existing jobs at the plant.

Nissan also pointed out, as it has done consistently since 2016, that the risk of a no-deal Brexit was a source of damaging uncertainty. While I am pleased that the decision taken in 2016 to build the Qashqai and secure the Sunderland plant is unchanged, it is deeply disappointing to me and to the workforce to find that the extra jobs that would have come from the X-Trail will no longer be created. I told the House that I would publish the correspondence with Nissan at the time of its original decision, as soon as the company advised that it was no longer commercially sensitive. I have previously shared it with the then chair of the Business, Energy and Industrial Strategy Committee, but I have now agreed with Nissan that it is reasonable to publish it in full today. Colleagues will see that it sets out exactly what I told the House in October 2016.

Grant support for training and development and for environmental improvements were applied for and approved by the Industrial Development Advisory Board on the basis that both the Qashqai and the X-Trail models would be built in Sunderland. Given yesterday’s announcement, if the company seeks to participate in those industry funding schemes—as I hope and expect it will—it will submit new applications in the standard way and undergo a process of independent assessment.

I am disappointed that the new jobs associated with the X-Trail will not now come to Sunderland, but I am pleased that the plant will benefit from substantial new investment in the existing models and that the decision to continue with the vital investment in the Qashqai, Leaf and Juke, and the jobs associated with them, is unaffected. These decisions were made on broader business grounds, but Nissan has commented on the need for us to come together to resolve the question about our future trading relationship with the EU. I believe that its advice should be listened to and acted on so that our automotive industry, which will undergo more change through innovation in the decade ahead than it has for most of the past century in areas such as battery technology and artificial intelligence, can seize the opportunities for Britain to be a world leader in state-of-the-art car making, providing great jobs and careers for hundreds of thousands of people during the years ahead. I commend the Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating the Statement made in the other place and must declare an interest as having bought a Qashqai for the very reason that it was made in the UK.

Nissan’s decision that the new X-Trail will no longer be built in Sunderland but instead in Japan is a bitter blow to the people of Sunderland and to the wider north-east. Close to 7,000 people are employed at the plant in Sunderland, with many thousands more along the wider supply chain and support services. Although the X-Trail decision does not impact directly on the existing workforce, it sets a worrying trend for the future.

What is interesting in the Secretary of State’s Statement is that the Government, as far as we are aware, are trying to pursue an industrial strategy that looks to develop a co-operative partnership approach with such an important sector—an initiative that we support and something that this side of the House has been calling for for many years.

Of course, Brexit was not the only factor in Nissan’s decision, and it would be dishonest to suggest that the issue of diesel did not play a part in Nissan’s thinking. However—and this is important—Nissan for the first time, through its European chairman, Gianluca de Ficchy, has brought to the fore the uncertainty of Brexit as a key factor. He said on Sunday:

“The continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future”.

That is a damning statement. The continued uncertainty is not helping.

What is more worrying is that the Government could help by ruling out the worst aspect of that uncertainty: that of a no-deal Brexit. The Government have the ability, the authority and the duty to do all they can to protect the interests of our businesses and economy.

My Lords, I too thank the Minister for repeating the Statement. Just over a year ago Secretary of State Greg Clark launched the automotive sector deal. Things were a bit different then: in a confident, upbeat foreword, he said that,

“the government is investing in a new industry-led programme to raise the competitiveness of UK suppliers to match the best in Europe”.

Today’s Statement underlines how much things have changed. How can the Government claim to be raising competitiveness when uncertainty and delay make it impossible for businesses to plan and invest? Nissan’s comments underline its struggle to plan ahead. Manufacturers do not even know what tariffs they will face at the end of next month, never mind the supply chain friction that will confront them. They are having to plan shutdowns in April to take stock of the situation. That is hardly raising competitiveness, and it is a key reason why confidence in the automotive industry is plummeting and, as the noble Lord on my right said, investment is halving.

One of the foundations of the Government’s industrial strategy was to create the best place to grow a business. It is clear that the abject confusion over Brexit and the surrounding discussions is weakening communities and the strategy. As the Minister said, we had confirmation yesterday that Nissan has decided not to build the X-Trail in the UK. However the Minister and the Secretary of State seek to dress this up, that is not a vote of confidence in the Government’s strategy. As the Secretary of State acknowledged, it injects uncertainty into an industry that is very important for the north-east—uncertainty over 7,000 direct-employment jobs and approximately 35,000 in the supply chain.

In the Statement, the Secretary of State was clear that Nissan had located in the north-east,

“having been persuaded by Mrs Thatcher that the combination of British engineering excellence and tariff-free access to the European Union made Britain an ideal location”.

My Lords, before I answer any of the questions put to me by noble Lords, may I correct myself? I think I misread from my right honourable friend’s Statement, in that I suggested some 3,000 companies have been supported by the regional growth fund since 2010. In fact, the figure is 30,000. I apologise for that small error.

Oh!

It is a smallish error of 90%. I have at least corrected it.

I welcome the comments of the noble Lord, Lord McNicol. I agree that this is a blow to Sunderland. It would have liked those extra jobs, but we have to remember that there are still 7,000 jobs in Sunderland that have been there for some time, largely because of the work originally done by my former right honourable friend Lady Thatcher when she, as Prime Minister, encouraged Nissan to come here. There are some 35,000 more jobs in the supply chain. This is good for Nissan, Sunderland and the whole of the north-east.

The noble Lord accepted that Brexit was not the only factor and that there were other problems in the whole automotive industry. Yes, there are. If the noble Lord would care to look—I recommend that the noble Lord, Lord Fox, does so—there are problems in the automotive industry throughout Europe in a big way. This is nothing to do with Brexit; it is because of changes we are making to regulation, changes to diesel, changes to the Chinese market and so on. I could go on. It is not all related to Brexit.

We have a world-leading and highly productive automotive sector, generating a turnover of some £78 billion—£6.5 billion GVA—and directly employing 65,000 people. Over the past two years we have continued to see further investment decisions. Britain has won competitive decisions on allocation of new car models for Nissan, Toyota, BMW and PSA Vauxhall, creating jobs in Sunderland, Derbyshire, Oxford and Luton. We still have an industry that we can be proud of and that can continue to do well.

The motivations for Nissan’s decision must be a matter for Nissan. It has to make decisions relating to its workforce where its plants are throughout the world. We accept that Brexit will be one small part of that and, as Nissan said, that it is still waiting for clarity on what the future trading relationship between the UK and the EU will look like. We therefore repeat our request for UK and EU negotiators to work collaboratively towards an orderly, balanced Brexit that will continue to encourage mutually beneficial trade. That is what Her Majesty’s Government will continue to do, as my right honourable friend the Prime Minister has made clear. We do not want a no-deal exit. As my right honourable friend said, we will work towards the meaningful vote as soon as possible.

My Lords, I declare an interest as the owner of a diesel-powered Mini that was exempt from the congestion charge, but who, I am now told, will have to pay the congestion charge plus another £12 because of the emissions. This arises because of EU regulations.

Oh!

Yes, it does. The EU was responsible. Under Gordon Brown’s Government we were encouraged to buy diesel cars and to put diesel fuel into them. The duty on the fuel was reduced. So to blame the manufacturers and Brexit for this problem is quite ridiculous. What are Jaguar Land Rover and Nissan, which have to plan in the long term for the production of their cars, to make of a regulatory regime that flips from being in favour of diesel one day to being against? Why are we surprised that Nissan no longer wishes to concentrate on producing diesel-operated vehicles in Europe and instead wishes to look to the future, to electric? Are the Government not to be congratulated on encouraging that investment in the north-east—an investment in the future, not in the past?

I am very grateful to my noble friend for making those points and making them so well. I also declare an interest as an owner for the last 30 years of a whole series of diesel cars. Further, my wife—possibly inadvertently—bought a Volkswagen diesel at probably exactly the wrong moment, just before the scandal erupted in that field. I think we can say that changes to diesel regulations are a factor in decisions being made—decisions that the whole automotive industry has to make. It is also a factor for the Government to consider in deciding which new technologies we should support in future. I can give an assurance to my noble friend that the Government will continue, as he suggested, to support those new technologies.

My Lords, I have been asked by my right reverend friend the Bishop of Durham, who is detained in his diocese, to ask the following question. While he recognises the promised protection of existing jobs, does the Minister recognise that Nissan’s X-Trail announcement will inevitably cause real worry for existing staff about the sustainability of their jobs, both at Nissan and in the supply chain? Will the Minister say how Her Majesty’s Government intend to allay such concerns at local level and what they might do to encourage Nissan to invest more in the development of electric cars and autonomous vehicles?

I am grateful to the right reverend Prelate for asking that question and for underlining the obvious concerns of all people living in Sunderland, Durham and the wider north-east, including the 7,000 workers at Nissan and the 35,000 people supported in the supply chain. We will continue to talk to all concerned; we want to allay those fears. We are very grateful that Nissan continues to be committed to that site. It has made enormous investments there over the last 30-plus years. As the right reverend Prelate stressed, we will also continue to make investments in R&D and new technologies in other fields. The automotive industry is changing, and what we have all been saying about diesel holds true. There will be a decline in diesel sales, but we hope to see a greater take-up in others.

My Lords, does the Minister not recognise that the real story here is that the Government—perhaps understandably—in 2016 gave an undertaking to Nissan that there would be no deterioration in its access to the European market, which they have proved unable to deliver? That is the real story, is it not?

The Minister referred to Baroness Thatcher and the role she played in getting Nissan established. I fundamentally and absolutely agree with that. I was the British Permanent Representative at the time. We had a lot of trouble because the French Government wanted origin rules to be applied to the production in Sunderland, which would have destroyed the case for investment there. Thanks largely to the late Lord Cockfield, that attempt was defeated. How sure is the Minister that, if we leave the European Union, the issue of origin rules will not arise again and affect the capacity of foreign investors in this country to export cars to the European Union?

I am grateful to the noble Lord, Lord Hannay, for paying tribute to the late Lady Thatcher and for reminding us of the work of the late Lord Cockfield, whom many of us remember. As regards what will happen to the rules for the future, that will depend very much on negotiations. Those negotiations will continue. I very much hope that we get a deal that is suitable to make sure that this company can continue to flourish. I am sure that it will continue to flourish, and will continue to flourish in Sunderland, irrespective of what happens.

My Lords, I echo the concerns raised by the right reverend Prelate, but in its statement Nissan specifically mentioned the uncertainty created by Brexit. Another factor too is the recent conclusion of the EU-Japan trade agreement, which will make exporting from Japan to the EU and vice versa cheaper and simpler. Yet that is an agreement that we risk being excluded from after 29 March. Can Nissan and the people of Sunderland be assured that we will not have a no-deal Brexit that will make an already worrying situation even more serious?