Manufacturer and parent noise over Brexit intensifies
Manufacturers and parents of lessors have started to publicise the effects of a no-deal Brexit on their businesses and footprints in the UK.
The regulatory investigation over RBS’s Global Restructuring Unit has attracted a level of media coverage not seen since the state bailouts of the 2008 crisis. Its legacy is set to be long-lasting, starting with the Financial Conduct Authority’s (FCA) intention to expand the tools SMEs can resort to if they have a grievance with finance providers. Regulation will get more encompassing in the future, but now that the RBS report is publicly available, what are the errors that RBS made – and that should be avoided from now on?
The UK chief executive of manufacturer Siemens has warned that the German company may limit its investment in the UK as a result of uncertainty over the country’s departure from the European Union, especially in the event of a ‘no deal’ departure.
Speaking to Reuters, Juergen Maier said: “My biggest worry about Brexit is that I don’t know what we are planning for.”
The UK is Siemens’ fourth-largest market after the United States, Germany and China. It employs 15,000 people in the UK and it is estimated that 56,000 UK jobs depend on it.
The captive finance arm of Siemens, Siemens Financial Services (SFS), has a large UK base in Stoke Poges, Buckinghamshire.
During the interview Maier said: “If the Brexit we end up having provides significant friction, provides significant cost then of course that will be an argument against making investments here in the UK.
“Are parts going to be able to pass frictionless over the border, or are we in a situation where we are struggling to export from the UK?
“The fact is it’s very difficult because we don’t know exactly what we are planning for. Contingency planning is very difficult when the options are so varied. We have got contingency plans that we can implement depending on various scenarios and one of those scenarios is a no deal – but let me tell you that scenario doesn’t look very good.”
Maier also claimed that adding two minutes onto every lorry’s customs procedure passing through Dover would produce a 14-mile tailback on either side of the Channel after one day.
For BMW no deal Brexit is a ‘decisive issue that ultimately could damage [the motor] industry’, according to Ian Robertson, BMW UK senior board member.
BMW employs around 8000 people in the UK, and manufactures the Rolls-Royce and Mini brands.
BMW has three financial services arms with business in the UK market – Alphera dealing with consumer finance, fleet lessor Alphabet, and captive funder BMW Financial Services.
Robertson said: “If we don’t get clarity in the next couple of months we have to start making those contingency plans… which means making the UK less competitive than it is in a very competitive world right now.”
BMW has previously warned about the damage of a ‘no deal’ Brexit, and in May chief executive Harald Krueger said the company had to remain “flexible” about production facilities.
The company has built up an alternative manufacturing base in the Netherlands amid these concerns about Britain’s suitability as an export hub after Brexit.
In addition to being a member of the board at BMW, Robertson has been the chairman of Rolls-Royce Motor Cars since 2004.
Prior to the referendum in June 2016, Robertson had issued similar warnings over the effect of Brexit on BMW’s presence in the United Kingdom. At that time Robertson said in an interview with Reuters: “The UK is a prosperous economy but if you imagine it without the flow of labour from the EU, I firmly believe that the British economy would not be in as strong a shape as it is.”
The warnings of a BMW no deal Brexit follow news of an Airbus risk assessment that the company could lose up to €1bn a week in the event of Britain leaving the European Union without establishing the terms of a trade partnership with EU nations.
The Society of Motor Manufacturers and Traders (SMMT) called on the government to deliver a Brexit deal that keeps Britain in the European customs union and maintains single market benefits.
The statement comes in light of the 19th annual Sustainability Report, which showed a record turnover of £82bn in 2017, an eighth consecutive year of growth. The SMMT has stated there is ‘growing concern that progress could be reversed in the absence of clarity on our future regulatory and customs relations with the EU’.
An SMMT said: “Government must take steps to boost investor confidence and safeguard the thousands of jobs that depend on the sector. Leaving the single market and customs union will bring an end to the seamless movement of goods that UK Automotive relies upon, with more than 1,100 trucks from the EU bringing components to car and engine plants every day.
SMMT chief executive Mike Hawes said: “Today’s figures show the critical importance of the automotive industry to the UK economy. There is growing frustration in global boardrooms at the slow pace of negotiations. The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.”
5. Jaguar Land Rover
Jaguar Land Rover (JLR) could move the bulk of its operations abroad to avoid £1.2bn in yearly tariffs in case of a “no-deal” Brexit, its chief executive said, making the Tata-owned carmaker the latest manufacturer to warn against the scenario.
Speaking to the Financial Times, chief executive Ralf Speth said the carmaker needed reassurances before committing to an £80bn investment plan in the UK, aimed at boosting production of electric flagship the i-Pace.
JLR’s retail finance partner is Lloyds Banking Group’s Black Horse. The two recently renewed their vendor finance partnership to last until late 2020. Black Horse declined to comment.
“Jaguar Land Rover’s heart and soul is in the UK,” Speth said. “We have to decide whether we bring additional vehicles, and electric vehicles with new technology with batteries and motors into the UK.
“We have other options. If I do it here and Brexit goes in the wrong direction, then what is going to happen to the company?”
According to JLR, its vehicles account for a third of UK car exports, and 40% of parts they use are imported from Europe.