Nissan has told staff in Sunderland that it will cancel plans to build its new X-Trail SUV at the plant there, following reports in the news on Saturday.
A letter from the chairman of Nissan Europe to Sunderland factory staff, which has been obtained by Sky News, confirmed the news and telling them the model will continue to be made in Japan.
The government said the news was “a blow to the sector and the region” but that no jobs would go.
In the letter, Gianluca de Ficchy said the reasons for the decision were a mixture of investment needed for emissions regulations and reduced sales forecasts, but added that Brexit had played a part.
He said the news would be “interpreted by a lot of people as a decision related to Brexit” and that “uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future”.
He added: “With the UK’s departure from the EU on March 29th getting closer every week, we have a taskforce in place, reporting to me, that it is considering all of the possible scenarios and the potential impact on business.”
Business Secretary Greg Clark said: “Nissan’s announcement is no doubt a blow to the sector and the region, but the company has confirmed that no jobs will be lost as this was to be a further significant expansion of the site and the workforce.
“They have reiterated today their commitment to the UK by continuing to manufacture in Sunderland the current Qashqai, Leaf and Juke models and the new Qashqai model from 2020.”
Commenting on the story on Twitter, Jeremy Corbyn said: “The Conservatives’ botched negotiations and threat of a No Deal Brexit is causing uncertainty and damaging Britain’s economy.”
Meanwhile Sharon Hodgson, Labour MP for Washington and Sunderland West, said: “This is a great loss of future investment in Sunderland and I am sure that many people will share my huge and disappointment and concern at this news.
She added that she will be seeking answers from the government “as a matter of urgency”.
The Japanese car-maker had previously voiced concerns about Brexit, before committing to building the new Qashqai and X-Trail models at the north-east plant in October 2016.
At the time, the decision had eased concerns about the plant’s future post-Brexit.
X-Trail and Qashqai production had secured thousands of jobs in the Brexit-backing city, but prompted a volley of questions over whether a so-called “sweetheart deal” between the car-maker and the Government had been struck to protect the manufacturer from any post-Brexit EU tariff wall.
Ministers strongly denied any financial incentives were offered and Chancellor Philip Hammond said any costs arising from the assurances would be small enough to be covered within existing spending limits at the Department for Business.
Nissan is part-owned by French manufacturer Renault, which had led to concerns that production could be moved to France to avoid any tariffs which might be introduced on exports to the EU if the UK leaves the single market in a hard Brexit.
Other Nissan models built at the Sunderland plant include the Qashqai, Juke, Q30, Note and the zero-emission electric Leaf.
Earlier this month American car manufacturer Ford confirmed nearly 400 jobs would be lost at its engine manufacturing plant in Bridgend.
The company said the “voluntary separation programme” at the Welsh factory is needed to cut costs and create a “sustainably profitable business” in Europe.
It followed a similar move by Jaguar Land Rover to reduce its 44,000 workforce by 4,500 under plans to make £2.5 billion of cost savings.
Most of the cuts will be in the UK, with a voluntary programme being launched, and are in addition to 1,500 workers who left the company last year.
Japanese firm Honda also announced six non-production days in April under contingency plans to mitigate the risk of disruption to production at its Swindon factory after the UK leaves the EU.