A BMW AG badge is seen on the wheel of a BMW 330e plug-in hybrid vehicle at their assembly plant in Amata, Rayong province, Thailand. (Photographer: Brent Lewin/Bloomberg)

BMW Warns of U.K. Pullback If There’s No Brexit Deal

(Bloomberg) -- German automaker BMW AG joined a rising chorus of businesses warning they will have to pull back on investment in the U.K. if a Brexit deal isn’t reached that ensures goods can flow freely to the European Union.

“The ongoing uncertainty surrounding the Brexit negotiations is not helpful when it comes to making long-term business decisions,” Munich-based BMW said Monday in a statement. “In particular, the lack of clarity surrounding future customs arrangements remains a cause for concern.”

The carefully worded comments were issued in response to a Financial Times interview with BMW’s customs manager, Stephan Freismuth. His language was more blunt, saying the carmaker would be forced to rethink production at its four U.K. plants if products are stopped at the border. In that scenario, “then we cannot produce our products in the U.K.,” he told the newspaper.

The U.K.’s motor industry is already feeling the pinch from uncertainty, with investment halving in the first six months to 347 million pounds ($461 million), Michael Hawes, head of the Society for Motor Manufacturers and Traders, said in an interview on BBC Radio 4’s Today program. His members are “waiting as long as possible to make future commitments.”

The industry risks “death by a thousand cuts” if Britain exits with no deal, as the nation’s plants gradually become less competitive, making it more difficult to win contracts for new models, Hawes said.

Reliability Issues

BMW stressed in its statement that the company remains committed to its four U.K. plants, which produce Mini and Rolls-Royce cars, along with BMW engines and body parts. But the warning, following a similar outburst by European planemaker Airbus SE last week, suggests businesses are becoming more outspoken -- with a deadline looming early next year -- as they wait for a Brexit deal to take shape. Indeed, another BMW executive told the BBC on Friday that the carmaker will have to start making contingency plans next month.

“The automotive industry is a global one, with parts and finished products needing to move as freely as possible between markets, in order to facilitate just-in-time production,” BMW said. “Clearly if parts cannot physically get to a factory at the expected time, that factory will not run as smoothly and reliably as is desirable.”

The warning by Airbus, which sits at the apex of British manufacturing, sent politicians scrambling to offer reassurance that the government is listening. The final Brexit agreement with the EU must ensure the continued success of Britain’s aerospace sector, Business Secretary Greg Clark told lawmakers on Monday.

The key issue for manufacturers is being able to move parts in and out of the EU without extra steps, delays or costs. That would allow their modern production systems to continue unimpeded, in which components frequently cross borders during manufacturing.

Jaguar Move

Jaguar Land Rover has said it’s planning to move all production of its Land Rover Discovery SUV to a plant in Slovakia from next year, and will retool the U.K. plant where it’s built in order to develop electric cars there. A spokesman for the company declined to comment Monday on whether it was planning any other job or production moves in the event of a no-deal Brexit.

Responding to questions following the Airbus warning that a failure to strike a deal with the bloc would be “catastrophic” for the aerospace giant, Clark said the accord Prime Minister Theresa May brokers should ensure no tariffs on components, no “unnecessary friction” at the borders, and the easy movement of skilled workers within multinational companies.

“We are determined to secure a deal with the EU that meets the needs of our aerospace firms and the thousands of people whose livelihoods depend on them,” Clark said.

©2018 Bloomberg L.P.

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