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(CNN) —  

Japanese car manufacturer Nissan has confirmed it is scrapping plans to build a new model in the English city of Sunderland, citing uncertainty over Brexit and further highlighting employers’ fears of a no-deal departure by the UK from the European Union.

The company had said in 2016 that it would produce the new X-Trail model at its Sunderland factory after getting reassurances from the government over Brexit – an intervention hailed by Prime Minister Theresa May as a “vote of confidence” in British business after voters backed leaving the EU.

Now it’s reversed those plans and will instead continue to build the X-Trail in Japan, it confirmed on Sunday, dealing a major blow to the region’s economy and underlining repeated concerns from the British automotive industry over damage to the sector caused by Brexit.

“The continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future,” Nissan’s Europe chairman Gianluca de Ficchy said in a statement, after explaining that keeping production in Japan would reduce “upfront investment costs.”

The decision was quickly seized upon by anti-Brexit MPs and campaigners, and places further pressure on May as she seeks to salvage her withdrawal agreement with the EU and pass it through parliament.

“This represents a serious blow to the communities that depend on the jobs Nissan creates and supports,” Keir Starmer, the opposition Labour Party’s Brexit spokesman, wrote on Twitter.

“The Tories’ chaotic handling of the Brexit negotiations is having a devastating impact on business investment. It’s time ministers got a grip on this crisis,” he added.

Nissan’s Sunderland facility is the largest car factory in the UK, employing more than 7,000 people. Plans for two future Nissan car models, the Juke and Qashqai, to be produced at the plant are “unaffected,” the company’s statement said.

“We appreciate this will be disappointing for our UK team and partners. Our workforce in Sunderland has our full confidence, and will continue to benefit from the investment planned for Juke and Qashqai,” de Ficchy said.

During the 2016 referendum, Nissan said it opposed Brexit and that remaining in the EU would make “the most sense for jobs, trade and costs.” Sunderland ultimately voted to leave by 61% – making it one of the most pro-Brexit cities in the UK.

Growing fears

The British car industry has already seen a dramatic drop in investment since the vote, and business leaders have warned of further blows to the sector after the UK’s withdrawal.

The Society of Motor Manufacturers and Traders said in June that investment in new models, equipment and facilities in the UK was £347 million ($460 million) in the first half of the year, compared to £647 million ($860 million) in the same period of 2017 – a decrease of about half.

And the head of Britain’s top business lobby group warned the same month that the country’s car industry could be wiped out by Brexit.

“There is a risk that the auto industry in the UK faces extinction if there’s no customs union after Brexit,” said Paul Drechsler, president of the Confederation of British Industry (CBI).

The latest blow from Nissan comes weeks after Britain’s biggest carmaker, Jaguar Land Rover, announced it would reduce its global workforce by 4,500.

The company had previously said that crashing out of the EU without maintaining a smooth relationship with the bloc would wipe out more than £1.2 billion ($1.5 billion) of its annual profit.

Alanna Petroff contributed reporting.