Brexit Prompts German Laser Maker to Ditch British Suppliers
Brexit Prompts German Laser Maker to Ditch British Suppliers
(Bloomberg) -- For years, Berlin-based Limmer Laser GmbH bought a hard-to-find lens almost exclusively from a British partner. Then came Brexit.
With trade between the U.K. and the European Union under threat, Bjoern-Frederic Limmer -- managing director of the small, family-owned manufacturer -- reviewed the risks posed by delivery delays or increased costs from potential customs duties. His conclusion? British components were too risky and alternative suppliers were needed.
“It’s critical that I get parts at the right time, in the right specifications, at the right price,” Limmer said at the company’s production site in the south of the German capital. “Even if only a small filter is missing, I can’t deliver.”
Like most manufacturers, Limmer is dependent on parts suppliers, with relations built up over years and generally taken for granted. But the disruption caused by the U.K.’s decision to exit the EU and its inability to reach a deal to secure future relations with the bloc are straining ties between European firms like Limmer and their British partners.
Businesses already bewildered by the Brexit debacle are bracing for more confusion when the Conservative party removes Prime Minister Theresa May from power. Some of those pushing to replace her are willing to allow Britain to crash out without a withdrawal agreement. May’s failed exit deal at least contained interim trading arrangements designed to avoid widespread disruption.
Manufacturers with U.K. operations that rely on just-in-time deliveries of parts and material are also feeling the pain. Japanese automaker Nissan Motor Co. abandoned plans to build a new model at its factory in North East England, and rivals BMW AG and Toyota Motor Corp. have raised the prospect of moving out of the country.
To counter such upheaval, British firms are increasingly setting up shop in Germany. The country’s development agency registered a 34% surge in investment projects from the U.K., with Brexit one of the key reasons.
While Limmer Laser tries to buy most of its components locally, some are too specialized to find in Germany. One of those is an amber-hued, thumbnail-sized lens that allows a laser beam to make precise incisions to remove tumors or repair scars. Without it, the company can’t deliver its surgical lasers, which can cost as much 80,000 euros ($89,000).
Shifting Purchases
Rather than risking machines sitting around half finished, the company is shifting purchases gradually to an American company. It’s maintaining links to its British supplier, pending the final outcome of Brexit, which Limmer -- who didn’t want to identify the firm’s partners -- sees increasingly likely to end up without a deal.
The German manufacturer is similarly reducing its exposure to a British supplier of a specialized mirror that redirects its laser beams, but allows other light to pass through. Again, the winner of the disruption is an American company.
Limmer is also looking for hidden risks by checking to what extent sub-components on locally purchased circuit boards come from or via Britain -- home of the European operations for many American companies. Where it can, it has built up inventory by buying certain components online, with some prices quadrupling amid the scramble to secure supply.
“Paying a bit more for some components is better than not being able to deliver,” Limmer said, adding that the process to limit Brexit risks is never-ending. “Everyone’s frustrated.”
To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net
To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, ;Emma Ross-Thomas at erossthomas@bloomberg.net, Iain Rogers, Andrew Blackman
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