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The event, organized by the Economic Council of Chancellor Angela Merkel’s ruling party, discussed the possible implications of Brexit, an issue that is particularly relevant in a country that exports more goods to the United Kingdom (UK) than any other exporter: tariffs, logistics challenges, supply. interference.
However, in the context of difficult negotiations on future trade relations between the UK and the European Union, European companies – from larger companies like BMW AG and Danish Arla Foods to smaller companies – are determined to take immediate action. as soon as possible. the actions reflected the real situation.
During the four years of political wrangling, implementation of the deal has been repeatedly postponed, given the turmoil that Brexit could cause without the deal. It is now clear to many business leaders that they can no longer expect this to happen again after the UK announced a controversial bill that violates an exit agreement signed with the European Union in January.
While there is still hope that a deal will be reached, companies are preparing for what they see as a baseline scenario, stockpiling inventory and reverting to “contingency plans” that they no longer needed.
BMW, a maker of Mini and Rolls-Royce cars, has drawn up plans to protect stocks at its Mini plant in Oxford, which produces around 120 models a day and supplies auto parts to 400 European companies.
Airbus maker Airbus, which relies on the free movement of goods between its divisions in France, Germany, Spain and the United Kingdom, has resumed its weekly management meetings on the Brexit crisis, having spent tens of millions of euros on Spare stock to keep up. .
In the financial sector, France’s BNP Paribas SA is moving part of its sales position from the UK to the mainland, as staff in those divisions will no longer be able to sell services to EU clients. British banks are informing some EU customers that their accounts will be closed and credit cards canceled.
Arla Foods, the largest dairy producer in northern Europe, is concerned about the possibility of € 100 million 116 million in losses if a trade agreement is not reached. Executives of the Danish company on September 15. The meeting in Copenhagen attempted to pressure the country’s foreign minister, Jeppei Kofod, to intensify his efforts to reach an agreement.
United Kingdom
“I am very concerned that with so little time left, negotiations appear to be stalling, confidence is eroding,” said Peter Giortz Carlsen, Arla’s executive vice president for Europe. “We are prepared for the worst case scenario.”
In the era of COVID-19, Brexit may seem secondary to European politicians, but business leaders are being pushed to the front as they try to overcome the effects of the pandemic on their industries.
Negotiators from the UK and the EU will meet in Brussels next week for their final round of talks. As there is still disagreement on key issues, including fishing rights in British waters and state aid rules, officials are not expecting a breakthrough. Then there will be a total of two weeks to reach an agreement before the final October 15. the deadline set by Prime Minister Boris Johnson.
No country has as much to lose as Germany, Europe’s largest exporter. The UK bought products from Germany worth more than € 85 billion last year. More than any other country in the world. Around 460,000 jobs in Europe’s largest economy depend on exports to the UK, according to data from the German Institute for Labor Market Research IAB.
The 40 participants in Tuesday’s meeting heard about tariffs on a range of products, from Mercedes-Benz cars to Bayer drugs, and about the expiration of the blanket regulation, which will affect the supply chains of major chemical manufacturers such as BSF SE. They were concerned about how UK consumer data and packages stuck should be handled as of January 1. On the same day, London authorities warned of possible queues of 7,000 trucks in England in a “reasonable worst case” (GAP) scenario if a deal could not be reached before the end of the year. Connections to the railway line in the tunnel under the English Channel are also likely to be “significantly disrupted” if the issue of their jurisdiction is not resolved, according to a report by UK lawmakers released last week.
The automobile industry will be particularly affected. German trade group VAA also called an emergency meeting last week; During the two-hour virtual conference, they discussed a wide range of current issues, including fees, logistics, and freedom of movement for workers.
The European car industry will lose around € 110 billion. In the case of no-deal Brexit, more than a week ago, two dozen regional automotive industry groups announced a turnover of € 1 billion by 2025. And where else is the damage caused by the coronavirus pandemic: this year, About $ 100 billion was lost due to the closure of factories and showrooms due to quarantine. production, according to a joint statement from the groups.
If no agreement is reached before the end of the year, companies will have to trade under the non-preferential rules of origin of the World Trade Organization (WTO), that is, 10%. auto rates and up to 22 percent. – vans and tractors, – these taxes are much higher than the margins of most manufacturers. Swedish truck manufacturer Volvo Group has announced that it intends to continue preparing for the sale under such conditions.
When assembling the Mini models in Oxford, BMW uses parts supplied by companies across the continent, such as windshields made in Germany and interior headliners from Italy. Eight out of ten Mini and Rolls Royce cars made in the UK are exported, more than half of them to EU countries. This would mean that BMW could have to pay tariffs on imported parts, as well as on exported cars.
Many export-oriented Mittelstand companies (also known as small and medium-sized companies in Germany), which form the backbone of the German economy, are also upset. In recent weeks, they have been actively consulting with the British Chamber of Commerce in Germany, said Ilka Hartmann, who led the group.
“The feeling of insecurity is putting pressure on everyone,” he said. “The expectation of a meaningful agreement is not just an urgent emergency measure, it fades with each passing day.”
Sortimo International GmbH, which employs around 1,800 people, mainly in Germany, manufactures cantilever racks for the conversion of conventional passenger cars into special multi-service vehicles. Sortimo generates about a fifth of the 250 million. It has annual sales in the UK, employs around 70 people and serves clients such as British Gas and Scottish Water.
The company has created a working group of four to five specialists, which meets once a week. Although the group focused on fighting the coronavirus pandemic in the spring and early summer, it is now refocusing on Brexit.
Sortimo, near Manchester in the north of England, filled huge warehouses the size of a football field. The company has even considered increasing production capacity in the UK due to looming tariffs, but has now abandoned those plans because the pandemic has slowed demand. Sortimo currently plans to cut costs to make it more crash resistant, as the threat of the two worst-case scenarios appears to have gone nowhere, said Reinhold Brown, the company’s chief executive.
“The economic impact of the quarantine only exacerbates the difficulties of ‘hard’ Brexit,” Brown said. “Both the effects of the pandemic and Brexit make it virtually impossible to predict the future of the business.”
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