Philips's Factory in the U.K. Hangs in Balance Over Brexit

(Bloomberg) -- Prospects for Royal Philips NV’s U.K. baby products factory are growing increasingly bleak with every passing month of political wrangling over Brexit.

The Dutch health-tech company has been warning since July that anything short of a seamless single-market customs union between the U.K. and the European Union could result in the shutdown of production.

Lately, fluctuation in the pound amid increasing uncertainty about the outcome of the talks is hurting profitability at the site, according to Chief Executive Officer Frans van Houten. The currency has always been a barometer of Brexit developments, and is about 13 percent weaker compared with the dollar since 2016’s referendum.

“We do need to look at our manufacturing facility in the U.K.,” the CEO said in an interview Monday with Bloomberg TV. “We need friction-less trade and if that is in any way hampered, then the future of that factory may be at risk.”

The plant in Glemsford, Suffolk makes the same Avent brand bottles and pacifiers as another Philips factory in China. Should the U.K. plant close, one of the company’s sites in Europe would likely take over output, according to a spokesman. It’s a “regretful” situation, Van Houten said.

The U.K. and the EU are struggling to secure a divorce deal, leaving companies in limbo on the terms of the future relationship and whether additional paperwork, border delays and costs will become part of production processes. Philips has joined a host of other companies like Airbus SE, BMW AG and Jaguar Land Rover in warning of the consequences.

Compounding talks with the EU on terms for Brexit is U.K. Prime Minister Theresa May’s tenuous hold on power at home. “Time is ticking by,” Van Houten said. “We are quite anxious about the lack of progress.”

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