Nissan Warns Against the Effect of a No-Deal Brexit

Japanese carmaker Nissan and Royal Bank of Scotland have joined the ranks of the companies that warned about damage to the economy if Britain fails to secure a good trade deal ahead of its departure from the European Union.

Less than six months before Britain finally officially leaves the bloc, Prime Minister Theresa May has yet to find a proposal for economic ties that would please EU negotiator and both sides of her divided Conservative party.

The government has ramped up planning for a so-called no-deal Brexit when Britain, which is the world’s fifth largest economy, exits the European Union on March 29, 2019. This step has shaken financial markets and dislocated trade flows across Europe and beyond.

Nissan, which operates the country’s biggest automotive factory, said that leaving the bloc without a deal would have “serious implications” for Britain’s manufacturing industry.

In the two years since the Brexit vote, Nissan has restrained in public about the referendum. However, its warning now shows the growing alarm among firms and executives.

“Today we are among those companies with major investments in the UK who are still waiting for clarity on what the future trading relationship between the UK and the EU will look like,” said Nissan in its statement. “We urge the UK and EU negotiations to work collaboratively towards an orderly balanced Brexit that will continue to encourage mutually beneficial trade.”

RBS Chief Executive Ross McEwan said Britain’s economy might fall into recession if there was no deal to be made.

McEwan said that companies were scaling back investments because of the uncertainty and RBS was more careful about lending to the retail and construction industries in particular as Brexit approached.

“Big businesses are pausing, they are saying that in six months’ time I’ll have another look at the UK and I might come back, but if it’s really bad I’ll invest elsewhere – that’s the reality of where we are today,” said McEwan.

If Britain fails to seal a deal with the EU, that means the country would move from seamless trade with the world’s largest trading bloc to customs arrangement set by the World Trade Organization for external states with no preferential deals.

Britain’s Society of Motor Manufacturers and Traders said last month that tariffs of 10 percent under WTO rules would add on top of an average of 3,000 euros ($3,445) to the cost of British-built cars sold in the EU if fully passed on to buyers.

Carmakers are also anxious that port and road delays could slow down the movement of finished cars and parts, crippling output and adding costs, if Britain fails to agree with the trading bloc.

Nissan said in 2016 that it would build its next generation Qashqai SUV and a new X-Trail model at its Sunderland plant in northern England. This is a major boost to the government just a few months after Britain voted to leave the EU.

According to a source, the company had received a letter from the government that promises Nissan additional support if Britain’s departure from the EU reached the competitiveness of the plant.

Japan’s ambassador to Britain, Toji Tsuruoka, also issued a blunt warning to the government after meeting British ministers in February.

“If there is no profitability of continuing operation in the UK – not Japanese only – no private company can continue operation … It’s as simple as that,” he stated.

FSMSmart gives you the latest news updates, market trends, and news about forex, commodities, stocks and many more! Open an account now and learn more about other investment opportunities on FSM Smart.