Airbus's BelugaXL is designed to fly parts between its European factories © Airbus S.A.S.
Airbus's BelugaXL is designed to fly parts between its European factories © Airbus S.A.S.

Airbus on Brexit is a 'warning shot' to government

Will Green is news editor of Supply Management
22 June 2018

Airbus’s announcement that it should not extend its UK supplier base until the UK/EU relationship is understood is a “warning shot” to the government.

In a Brexit risk assessment the aerospace company said whether there was a trade deal with the EU or not, disruptions would hit its supply chain.

This includes 4,000 suppliers in the UK and “an integrated supply chain with parts crossing the Channel multiple times”, operated on a “just-in-time basis relying on frictionless trade today provided by the combination of the EU Customs Union and Single Market rules”.

Airbus spends more than £5bn with its UK suppliers each year and it supports more than 117,000 jobs.

“Any change in customs procedures, logistics and environmental standards would have major industrial and cost impact,” said Airbus.

“Until we know and understand the new EU/UK relationship, Airbus should carefully monitor any new investments in the UK and should refrain from extending its UK suppliers/partners base.”

Paul Adams, head of aerospace at consultants Vendigital, said: “This is a warning shot to the government about the importance of negotiating an agreement that will meet the needs of industry by minimising the impact of tariff changes and avoiding customs delays.

“Many had thought that the UK’s aerospace industry was protected from the worst effects of the expected tariff changes, due to the exclusions that apply to many aerospace components.

“Clearly, no industry is immune to the impact of Brexit and UK workers could end up paying the price.”

Airbus said a no-deal Brexit “must be avoided” because it would “force Airbus to reconsider its footprint in the country”.

Under this scenario the company would need buffer stocks worth around €1bn, not accounting for lead time and logistics disruptions.

“Every week of unrecoverable delay would entail material working capital impact, re-allocation cost, cost for inefficient work, penalty payments to customers and up to €1bn weekly loss of turnover,” said Airbus.

Adams said: “Airbus is already stock piling inventory for fear that customs delays could cause production downtime after Brexit. This is putting pressure on the supply chain and could create cashflow difficulties for suppliers to its wing assembly plant in Broughton.”

Airbus said even an “orderly Brexit” would “still pose a significant amount of risk” because the time is too short for governmental agreements to be reached “and for Airbus and its tier one suppliers to agree and implement all the changes with their extensive UK supply chain”.

“The critical issues amongst others are the increased cost base due to trade procedures, airworthiness efforts and difficulty to move people,” said Airbus.

Tom Williams, chief operating officer of Airbus Commercial Aircraft, said: “In any scenario, Brexit has severe negative consequences for the UK aerospace industry and Airbus in particular.

“Far from Project Fear, this is a dawning reality for Airbus. Put simply, a no-deal scenario directly threatens Airbus’s future in the UK.”

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