An employee inspects a Nissan Qashqai on the production line at the Nissan Motor Co. production plant in Sunderland, U.K. (Photographer: Luke MacGregor/Bloomberg)

Nissan Deals Brexit Blow to Britain as May Starts Work on Plan B

(Bloomberg) -- Theresa May is launching a new working group to look for a Plan B on Brexit, but the prime minister’s latest initiative comes too late to stop businesses such as Nissan Motor Co. from ditching commitments to Britain.

The Japanese automaker cited ongoing doubts about the U.K.’s split from the European Union in its decision to scrap plans to build a new vehicle model in the country.

May’s government had previously gone out on a limb to safeguard Nissan’s investment in the U.K., offering private assurances to the company. The Times newspaper suggested ministers will now consider withdrawing a 60 million pound ($78 million) package of support for Nissan.

“The continued uncertainty around the U.K.’s future relationship with the EU is not helping companies like ours to plan for the future,” Nissan Europe Chairman Gianluca de Ficchy said on Sunday.

Business Secretary Greg Clark described Nissan’s decision as “a blow to the sector and the region.” Speaking to the Financial Times, he said the announcement was a “warning sign” of the damage that would follow a no-deal Brexit. A messy departure is the outcome most feared by business, with Airbus SE saying last month it would force the plane maker to make "very harmful decisions" for the U.K.

But even if May secures a smooth departure, almost three years of uncertainty over Brexit has already damaged the U.K. economy -- and some of the losses are irreversible. Read our run-down of the industries that have lost jobs, investment and talent as a result of the split.

Nissan Deals Brexit Blow to Britain as May Starts Work on Plan B

As time runs short to secure a divorce accord with the EU, May is expected to return to Brussels within days in an attempt to rewrite the most difficult chapter in the draft agreement -- on the Irish border backstop plan.

May is seeking a seemingly impossible compromise between the minimal changes that Brussels says it will consider, and the radical rewrite that euro-skeptics in her Conservative Party are demanding.

On Monday the premier will launch a new government working group intended to unite the feuding pro- and anti-Brexit factions within the party, according to May’s office. The body will explore “alternative arrangements” for avoiding a hard border with Ireland, after Parliament voted to reject the so-called backstop plan last week.

Home Secretary Sajid Javid said the technology already exists to replace the proposed backstop, which critics fear would tie the U.K. into the EU’s customs rules indefinitely.

Speaking to the BBC on Sunday, Javid said border enforcement officials told him currently available technological systems mean there’s no need for checkpoints and other infrastructure on the U.K.’s land border with Ireland after Brexit.

But one of the EU’s most senior Brexit officials slapped down the idea in a tweet that she said was “fact-checking” British policy. “Can technology solve the Irish border problem?” Sabine Weyand, the EU’s deputy chief negotiator, wrote on Sunday. “Short answer: not in the next few years.”

There’s no sign that the standoff will end soon, whatever the cost for businesses. The government expects negotiations to go down to the wire, leaving the threat of a chaotic no-deal split that casts a shadow over companies right up to next month’s deadline.

“It’s inevitable that in these types of negotiations things do get decided close to the last minute -- that’s when the maximum political pressure is,” Chief Secretary to the Treasury Liz Truss told BBC Radio 5 Live.

Nissan Deals Brexit Blow to Britain as May Starts Work on Plan B

Truss insisted that the “threat of no deal” must be maintained to get the EU “on board,” and also because it’s already helping to bring Parliament closer to a consensus.

Her comments suggest the final eight weeks until March 29 -- the U.K.’s scheduled exit day -- will be fraught with tension.

©2019 Bloomberg L.P.