News around car manufacturer Nissan has recently surfaced after a Financial Times article which stated that the car giant is in the advanced stages of talks with the UK to build a huge car battery gigafactory.
Nissan already has a large UK presence with the firm’s large car factory in Sunderland which employs about 7000 people, according to the BBC.
Nissan’s UK presence, which is mainly in the Northern Regions, is great for the UK economy and the regional Northern economy as the existence of these said factories provides highly skilled and well-paid employment opportunities to these regions which in the past have been hit by harsh structural unemployment due to the collapse of the steel industry.
This makes Nissan’s presence vital for certain regions in the UK economy as the highly paid work which the firm provides has been essential for the economic bounceback of regions such as Sunderland as newly employed workers spend their new disposable income leading to a multiplier.
Consequently, Nissan’s alleged announcement regarding their plans of constructing a new UK gigafactory is welcome news as FT’s report said Nissan wants the UK to be its main electric hub outside Japan.
However, although Government sources have confirmed the rumours, they also fear that it may be a long way away from Nissan actually entering the UK.
Hence, to incentivise Nissan to set up in the UK, the government may decide to introduce enterprise zones or other forms of public-private cooperation to reduce the costs and risks for Nissan so that the Japanese car manufacturer does not select a nation other than the UK.
As well as the multiplier effect, the UK economy sees additional benefits of Nissans foreign direct investment into the nation.
One of these main benefits is the increase in air quality as construction of the plant will potentially incentivise electric car production.
The plant in question is set to have an output of 200,000 batteries a year, batteries which are used for electric vehicles.
This means that, if more of these batteries are produced, not only will the supply increase (which lowers the price) but innovation will also occur as the specialised revolved around battery production is developed as more firms enter the market, such as Tesla who have also recently announced plans of setting up a gigafactory within the UK.
Therefore, if these firms set up within the UK, the levels of innovation within the electric car market due to electric battery production will be enough to make electric vehicles the rational choice for UK consumers compared to their outdated petrol and diesel counterparts, especially once the legislation concerning the purchasing of new petrol and diesel cars is introduced.
Consequently, because electric vehicles will be much more attractive for UK consumers, demand for electric cars will rise and more individuals will be driving electric.
As a result of this, emissions from the transport sector will decrease, which will yield a significant increase in air quality as transport has the highest share of emissions accounting for 27% of total UK emissions.
Not only will this help achieve the UK governments target of becoming carbon neutral by 2050 but these potential investments will also potentially increase the productive capacity of the UK economy due to the increasing air quality.
An increase in air quality means that fewer individuals will suffer from respiratory issues, because of this, the NHS will see a decrease in demand which is significant as the public health service currently has 5 million outstanding patients.
Hence, because the NHS will be able to allocate more factors of production towards treating outstanding patients, waiting times will decrease and individuals will be ill for a smaller period of time, enabling the UK populous to return to work much faster.
Consequently, because the speed at which workers are treated will rise, workers take less time off, leading to a rise in relative productivity per worker thus increasing productive efficiency and helping the UK economy achieve long term economic growth as an increase in output per person yields an expansion in productive capacity.
Thus, in judgement, this expansion in productive capacity will rectify the costs associated with high inflation, which comes as a result of the multiplier effect, such as decreased buying power, showing why the potential of a new Nissan factory and further investment is great for the UK economy.
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Written by Hubert Kucharski