Manufacturers gear-up for a 'no-deal' Brexit

Brexit Partners have been increasingly focused on a no-deal Brexit and its impacts and mitigations whilst working with businesses across industry sectors.

We note and applaud BMW for their decisive and imaginative contingency plan.  The Mini factory in Oxford will shut down for a month after Brexit at the end of March to minimise disruption in the event of a no-deal outcome.  They brought forward the annual summer maintenance shutdown to reduce any "possible short-term parts-supply disruption".

"While we believe this worst case scenario is an unlikely outcome, we have to plan for it." The German firm said it "remained committed" to its UK operations – and the downtime will be used to start preparing the plant to make the new electric Mini.

The concern is that in the event of a no-deal Brexit on 29 March, there could be disruption at the borders and shortages of parts.  Hundreds of lorries a day arrive at the factory with parts from across the world – of which 60% come from the EU.

A month ago BMW, masters of self-parking technology, were working with suppliers on how to fill out customs forms.  Training days were held in Munich and Oxford on the prosaic customs clearance procedures not needed for the last 40 years in order to move parts between the UK and the European Union.

BMW is far from alone in developing Brexit contingency plans as fears about the effect of a bad deal or no deal escalate.

Rolls Royce Jet Engines are moving design approval for some of its power plants from the UK to Germany – described by them as a "precautionary" Brexit safeguard.

Plane-maker Airbus SE says it may stockpile parts for its wing factory in Wales.

Jaguar Land Rover has warned the U.K. government that a ‘bad Brexit’ jeopardizes its future profitability – and that it has spent 10 million pounds on Brexit preparations.

Penny Todd, UK customs supervisor at Ford Motor, spoke at an industry conference in June about helping their suppliers who've never had to deal with import and export declarations before.  Ford, which has engine plants in England and Wales, says it hasn't yet run any training sessions.  They have estimated a potential additional $1bn annual costs if Brexit causes tariffs to operate at World Trade Organization levels.

This message was reinforced this week when, in a Radio 5 live interview, Head of Honda Europe, Ian Howells, said that a no-deal Brexit would cost his company tens of millions of pounds.  "In terms of administration, we'd probably be looking at something like sixty odd thousand additional bits of documentation we would have to provide to get product to and from Europe."

"And clearly if we end up with World Trade Organization tariffs we'd have something like 10% costs in addition on our shipped product back into Europe, and that would certainly run into tens of millions of pounds."

Brexit Partners Opinion

Planning for a 'no deal' is good business practice at this stage. Comments like civil unrest within two weeks of Brexit are not particularly helpful and are inconsistent with current public and investor sentiment.

 A 'no deal' is, however, likely to result in an uncoordinated approach over an unspecified period of time to normalising processes and relationships. Priority is likely to be given to those areas of greatest immediate pain.  Whilst neither the UK or EU are likely to exacerbate issues if they can be avoided, there will inevitably be new complexity and uncertainties.

We have been cataloguing and working through the impacts of over 70 EU ‘no-deal’ and 50 UK ‘no-deal’ ‘technical notices, the impacts of which are profound.  Yesterdays report from the Migration Advisory Committee [Brexit Partners Insight of 18 September 2018] adds to the uncertainty for employers and business.

Contact us to discuss your exposures to Brexit and discover how we can help you identify, quantify and plan for the impact of a 'no-deal' outcome on your business .

John ShuttleworthComment