Aviation braces for Brexit
farnborough (England) — Airbus is stockpiling parts in case of a hard Brexit and Rolls-Royce is months away from doing so. But for smaller aerospace companies that supply them, Britain’s departure from the EU could be much more challenging.
The largest aerospace sector in Europe and second in the world behind the United States, the British industry generates exports worth £30 billion ($39 billion) a year and sustains 123,000 direct jobs, plus as many again indirectly.
Manufacturing planes and engines requires components to be at factories on a just-in-time basis. A disorderly or no-deal Brexit would threaten the smooth flow of parts across borders and prevent European regulatory approval for aerospace products.
However much planning the industry giants do, they could still be damaged via their supply chains if component suppliers are not ready.
John Rainey, chairman of Denroy, a maker of injected moulded components used on Airbus planes, has contingency plans in place, but won’t sign off on any changes for the company of 165 employees until he knows what Brexit means.
“Everybody says you need a plan but we don’t know what to plan for or against. We’re going to conferences now and we’re told to be very afraid but we don’t know what we have to be afraid of,” he said at the Farnborough airshow, the annual showcase for the British aerospace industry.
Britain is due to leave the European Union on March 29, 2019, but there is little clarity over its future relationship with the world’s biggest trading bloc.
Alert to the potential problem, Rolls-Royce, which makes engines for aircraft and ships, has started to talk to smaller suppliers to look at “where some of the hotspots might be”, the company’s president of civil aerospace, Chris Cholerton, said. “We’ve got a bit of a heatmap of levels of risk,” he said.
Slow progress in the Brexit talks has convinced Europe’s Airbus, which makes the wings for its commercial aircraft in Wales, to activate plans to prepare for a worstcase, no-deal scenario. But few of the 4,000 companies in Airbus’s UK supply chain, many of which are small and medium-sized companies, have dedicated teams and sophisticated plans in place, a chink in the armour of big companies.
“There’s a limit to how much they [big companies] can do in terms of digging down,” said David Stewart, aerospace partner at consultancy firm Oliver Wyman. “There’s a small company that does this piece of bearing, clip, pump. You can’t go and check every one of those single companies to see how well prepared they are.”
Big companies hope that building up stocks of parts will allow factories to continue producing even if goods are held up at the border between Britain and the EU.
Depending on the future relationship, goods could require customs declarations and checks at borders, a major risk for Airbus whose components can cross borders two or three times before products are finished.
Tony Wood, CEO of Meggitt, which makes wheels and brakes for planemakers and has 11,000 employees globally, says he has examined how the company would fare under all the different outcomes. “We’ve done so many scenarios around Brexit planning,” he said.
Meggitt, which said only five per cent of its business is trading directly between the UK and Europe, says it can cope with the extra administration. —