LONDON • Jaguar Land Rover (JLR) warned the UK government that failing to secure a good deal on Brexit would wipe billions from its coffers and hobble an iconic British carmaker at a time when business is worried about limited trade access to the European Union (EU).
A “bad Brexit” would jeopardise as much as £80 billion (RM428.53 billion) in spending by JLR over the next five years, CEO Ralf Speth said on Wednesday in an emailed statement.
Extra costs and delays in parts deliveries coming from outside the UK would cut profit by £1.2 billion a year, he said.
“As a result, we would have to drastically adjust our spending profile,” Speth said. Shares of parent Tata Motors Ltd fell as much as 5.4%, and were down 2.3% at 1:49pm in Mumbai yesterday.
The warning from Speth came ahead of a crucial Cabinet meeting on Friday where Prime Minister Theresa May will try to find consensus on her latest proposal for the UK’s future economic relationship with the EU.
Brexit Secretary David Davis has already told May in a letter that the new customs plan is unworkable, a person familiar with the matter told Bloomberg News.
Businesses have become more outspoken amid government indecision that’s increased the chances of a so-called hard Brexit. JLR’s statement follows similar warnings from German automaker BMW AG and planemaker Airbus SE that they also may pull investment.
The head of an industry body for UK carmakers said last week that Brexit risked slowly suffocating investment with “death by a thousand cuts”, as manufacturers choose to build new models overseas instead of at British plants.
Speth’s comments contrast to pledges made last month by West Midlands-based JLR, when it promised to retool a plant near Birmingham for a new generation of electric cars.
All UK investment is in jeopardy, a JLR spokesman said, when asked about the plan at the historic Solihull plant. The company has already said it will move production of its Land Rover Discovery to Slovakia from that location by early next year. The £80 billion at risk represents all spending, including wages and buying parts, he said.
For car businesses, the debilitating effects of Brexit won’t be sudden or dramatic, but more of a slow drain that will sap an industry that powers about 10% of the UK’s economy. Airbus, based in Toulouse, France, has said it’s stockpiling parts to prepare for potential difficulties after Brexit occurs next spring.
JLR has already spent £10 million since the Brexit referendum on employing staff to make contingency plans for post-Brexit operations, the spokesman said, though it hasn’t spent any money putting those plans in place.
Tata Motors said in a statement yesterday that the investment plans that JLR presented to investors in June didn’t factor in a “worst-case Brexit scenario,” and the company stands by the intentions shared at the time.
“JLR needs free and full access to the single market beyond transition to remain competitive which we also firmly believe is in the best longterm interests of the UK,” Tata Motors CFO PB Balaji said in the statement. “JLR will continue to work with the government to secure the right free trade deal for the country, economy and industry.”