UK companies plead for Brexit deal

Rolls-Royce says its factory risks being paralysed, Airbus says costs for contingency planning have swelled


LONDON • Some of Britain’s largest and most storied manufacturers are making a last-ditch plea to lawmakers to avoid a disorderly retreat from the European Union (EU) with stark warnings of production grinding to a halt and political inertia hurting their business.

Ultra-luxury carmaker Rolls-Royce Motor Cars Ltd said its factory in southern England risks being paralysed in the event of a hard Brexit if just one component becomes unavailable because of border delays. At planemaker Airbus SE, which makes the wings for all its aircraft in the UK, uncertainty about which sort of Brexit may happen has become “really unbearable”, and costs for contingency planning and preparations have ballooned into the many millions, CEO Tom Enders said on Wednesday night in London.

With just 78 days left until the UK leaves the EU, one way or the other, the political stalemate continues to haunt companies that rely on the uninterrupted flow of goods and stability to make investments. Like other automakers, Rolls-Royce operates a just-in time production system, usually holding parts for no more than 24 hours, creating the risk that any supply-chain snags freeze up the entire operation.

“My plea to decision-makers in London: Whether you think that leaving the EU is good for the UK or not, by all means: Stop filibustering around this issue, allow for an orderly, agreed Brexit and find an agreement with Brussels,” Enders said in the British capital to an audience that included UK Chancellor of the Exchequer Philip Hammond.

Prime Minister Theresa May’s proposed exit agreement with the EU is widely expected to be rejected by lawmakers when it’s put to a vote in Parliament next week, keeping the possibility of a no-deal Brexit on the agenda.

Enders said the money already spent on stockpiling parts is only a fraction of what the company would incur in case of a disorderly divorce.

Rolls-Royce is also preparing for a no-deal split on March 29 by training suppliers in new import procedures, bringing forward an annual production halt to the first two weeks of April, investing in IT systems, and — like rival Aston Martin Lagonda Global Holdings plc — arranging for some parts to be flown in if ports become snarled by customs delays.

Still, the maker of the US$325,000 (RM1.33 million) SUV’s “super-fragile” logistics chain remains vulnerable, CEO Mueller-Oetvoes said in London on Wednesday.

“You can plan for whatever you want, but you can’t store up weeks of parts, and if the logistics chain breaks, it will affect production,” he said in a briefing at Rolls-Royce’s Mayfair showroom. “You only need to miss one component and you can’t finish the car.”

Rolls-Royce sources 32,000 parts used in its vehicles from more than 600 global suppliers, with only 8% produced in the UK. That requires 35 daily cross-Channel truck journeys.

The level of customisation on offer means each car takes about 800 hours to build, adding to the scope for disruption.

Other automakers like Jaguar Land Rover have warned that tens of thousands of British jobs are at risk in the event of a no-deal Brexit.

Whatever the circumstances, Rolls- Royce rules out moving production away from its Goodwood plant near England’s south coast, with the marque’s British credentials central to its appeal to the ultra-rich, Mueller- Oetvoes said.

“This is a no go,” he said, adding that Rolls-Royce is committed to Britain and that a third of its customers customers travel to Goodwood, “sitting with engineers and designers to specify their dream and see how we craft and hand-build things”.

For Airbus, too, moving out of the UK is fraught with complexity. The wings are among the most complex components of an aircraft and the facilities in the UK have honed decades of manufacturing expertise. At the same time, Airbus relies on open borders to make the logistics work, often shipping parts or entire wings back and forth between the mainland and the UK multiple times with special cargo planes.

Enders, an outspoken critic of the UK’s plan to leave the EU, stopped short of endorsing May’s deal that is awaiting a vote in Parliament next week. Hammond backed him in his view that leaving without a deal would run counter to British interest.

Speaking shortly after Enders, Hammond said his government will do “everything we can” to back the aerospace sector.