The car maker Nissan must re-apply for almost £60m of taxpayer cash after it decided not to proceed with plans to build the X-Trail SUV at its Sunderland plant.
A deal struck between the Government and Nissan in 2016 stipulated that the cash would only be paid if the car was made in the UK.
The company has received just £2.6m of the funds to date and business secretary Greg Clark confirmed that it must now apply again for the remainder.
Nissan had originally bid for £80m of state support, but after a review by an independent committee, the amount was reduced to £61m.
Clark told the House of Commons that the X-Trail would have created 741 UK jobs, but that Nissan would continue to build the Qashqai, Juke and Leaf in Sunderland.
The firm employs 7,000 staff there but says the new X-Trail will now be built in Japan, citing uncertainty over Brexit as one of the main reasons.
Clark said the decision was made on ‘broader business grounds’, but conceded that the current Brexit stalemate was a key factor in the U-turn.
He added: “Nissan commented on the need for us to come together and resolve the question of our future trading relationship with the EU.
“I believe their advice should be listened to and acted upon.”
Announcing Nissan’s decision, the firm’s Europe chairman, Gianluca de Ficchy, said ‘continued uncertainty’ over Brexit made it difficult to plan for the future.
In the 2016 letter from Clark to Carlos Ghosn – Nissan’s boss at the time – the minister said funding was on the condition that the Qashqai and X-Trail were made in Sunderland.
Ghosn has since been dismissed and is in custody in Japan over allegations of financial misconduct while at the helm of Nissan – he denies the claims.
Labour MP Rachel Reeves, who chairs the Business, Energy and Industrial Strategy committee, blamed ‘Government mishandling’ of Brexit for Nissan’s decision.
She added: “The reluctance to rule out ‘no deal’ and uncertainty around our future trading relationship with our biggest and nearest trading partner made this decision sadly predictable.”