While the world is justifiably focused on the global health crisis, the deadline for Brexit creeps ever closer, and Airbus may have another major issue on its hands. The CEO of Airbus has warned that the United Kingdom’s impending split from the European Union would threaten his company’s investment in the country if no trade deal is negotiated. The comments were made in Montreal during an interview yesterday.
Referring to a no-deal Brexit, Airbus had this bleak outlook:
“This extremely negative outcome for Airbus would be catastrophic.” – Airbus BREXIT Risk Assesment
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Airbus investment in the UK
Speaking to BNN Bloomberg yesterday, Airbus CEO Guillaume Faury said Airbus’ future investments would be at risk and highly dependent on the company’s ability to do business with the UK post-Brexit.
While the company has no plans to close or scale down its British factories, the Netherlands-headquartered planemaker will be closely watching the trade situation and how it will affect its competitiveness in the long-term.
“In the short term we’re not in a position where we have to make decisions — the plant and the activities which are in the U.K. are performing…I’m looking at the long-term situation and whether it will remain competitive for us to do business in the same way.” – Guillaume Faury, CEO, Airbus via BNN Bloomberg
Indeed, Airbus has been clear about its opposition to Brexit – particularly whilst Tom Enders was the company’s CEO. Enders, as the company’s leader, warned that Airbus could pull out of the U.K. if a deal wasn’t reached. However, since Faury took over in 2019, a softer tone has been projected, all the while stockpiling parts to protect against border delays. Additionally, Airbus has taken steps to move British design certification for aircraft parts to the EU.
In June 2018, Airbus published a two-page paper titled “BREXIT – Risk Assessment.” This two-and-a-half-year-old paper notes that the company has the following ties to the UK:
- Four major engineering and manufacturing facilities
- 14,000 employees at 25 sites
- 80,000 business trips between the UK and the EU annually
- 1,900 expatriates in the country
- 110,000 jobs in the UK supply chain
What is at risk for Airbus if there is no Brexit deal?
While the UK has much to lose, what would change for Airbus? Its risk assessment is clear about this.
“The decision by the UK to leave the EU will set new boundary conditions cutting through this highly integrated system. Brexit thus raises major operational challenges for Airbus as UK employees and suppliers are today key and efficient contributors to Airbus’ success.” -Airbus
If no trade deal is made, Airbus has stated that production is likely to be “severely disrupted” due to interruption to the flow of parts and/or discontinued airworthiness.
Despite Airbus’ steep ramp-up, demands on its A320 and A350 families had the planemaker’s critical industrial capabilities already running at full capacity. Airbus says that “every disruption to production would most likely turn into an unrecoverable delay.”
“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 €1B weekly loss of turnover. Despite the incremental stocks, the disruptions in a no deal Brexit situation are likely to add up to several weeks; potentially translating into a multi-billion impact on Airbus.”
And if there is a deal?
Simultaneously, the planemaker acknowledges that an orderly Brexit, one where a deal is negotiated, still comes with its own problems (even if not as catastrophic as a no-deal scenario).
It says that a new EU/UK relationship will entail new procedures, regulatory regimes, duplication of tasks, a divergence of standards, and more. This will potentially lead to higher complexity, more effort, more cost, more risks; more friction/delay in its deeply integrated supply chain.
In the BNN Bloomberg interview, Faury continued by saying, “It will be much better for the EU and the U.K. to have an orderly Brexit with a deal. This being said, if there’s no deal, we’ll have to live with it.”
With just over two weeks away, we will have to wait and see if a deal can be reached before midnight of January 1st, 2021.
Do you think Airbus will relocate its facilities out of the UK if no deal is reached? Let us know in the comments.