UK offered Nissan $100 million to ease its Brexit fears

The British government promised Nissan up to £80 million ($104 million) as it sought to reassure the Japanese carmaker about the future of its UK operations after the Brexit vote in 2016.

The offer was included in a letter from Business Secretary Greg Clark to former Nissan Chairman Carlos Ghosn dated October 21, 2016. The letter said UK support was contingent on Nissan building two models in England.

The letter, which was released by the UK government on Monday, has long been the subject of speculation.

The government had previously refused to detail its arrangements with Nissan, sparking concerns that a special deal had been struck to ensure continued investment at the company’s massive plant in Sunderland. UK voters chose to leave the European Union in a referendum in June 2016.

Clark wrote in the letter that supporting carmakers would be a priority during Brexit negotiations, and that he would ensure that Nissan could continue to export to and from the European Union.

The letter makes clear that in return for the full £80 million ($104 million), Nissan would need to “allocate production” of its Qashqai and X-Trail sport utility vehicles to Sunderland. Nissan did so on October 27, 2016.

“We recognize that the UK has a stake, and we are backing your continued success in Sunderland to the hilt,” Clark wrote in the letter.

Nissan on Sunday scrapped plans to build the X-Trail in Sunderland, citing uncertainty over Brexit as one reason for the decision. With less than two months to go to Brexit, there’s still no clarity about how companies in the United Kingdom will trade with the country’s biggest export market after March 29.

Speaking in parliament on Monday, Clark called the decision “disappointing.”

Nissan plays a key role in UK manufacturing.

Sunderland is the largest car plant in the United Kingdom and a source of employment for 6,700 people. Opened in 1986 by former Prime Minister Margaret Thatcher who celebrated Britain’s role as a gateway to Europe, the facility now produces roughly one in three British cars.

Nissan said in a statement on Monday that the letter showed its “continued desire to support investment” in the United Kingdom.

“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,” it said.

Progress toward a Brexit agreement has stalled in recent weeks because of deep political divisions in the United Kingdom.

The UK government is trying to forge a compromise, but businesses are increasingly worried that Britain could crash out of the European Union without a deal.

A disorderly exit would be disastrous for companies like Nissan that rely on the timely delivery of parts from the European Union. Supply chains would be snarled and shipments could be delayed at the border.

According to a public database maintained by the European Commission, Nissan received grants worth £61 million ($80 million) from the UK government in June 2018.

Nissan said in a statement that it had “accepted a formal offer from the UK Government in June 2018” that provided grant support to “a number of different projects in our Sunderland plant.”

“We continue to enjoy open dialogue with the UK Government and will discuss any implications with them for this grant support,” the statement added.

On Monday, Clark wrote in a letter to UK lawmakers that “any grant amount will only be awarded in line with the terms of the offer.”