Brexit delay could impact manufacturer shutdown plans

18 March 2019

Brexit delay could impact manufacturer shutdown plans

18 March 2019

Carmakers that pulled forward annual plant shutdowns due to the UK’s Brexit deadline are now being forced to continue with their plans despite a possible extension to the country’s departure date.

The UK Parliament voted for an extension to the date, originally 29 March, to allow it time to either approve and implement Prime Minister Theresa May’s Brexit deal or find another alternative. Ministers also voted against leaving the EU without a deal, although this option does remain on the table.

The PM has to go to Brussels to request an extension to Article 50 and has suggested that should the House of Commons back her deal in a third vote, following two previous defeats, Brexit could occur by 30 June. Should the bill be defeated again, however, the delay will be significantly longer.

BMW, Honda and Jaguar Land Rover (JLR) have all announced plans to close their factories in April, which, in line with the original Brexit deadline, would have allowed them time to iron out any issues surrounding parts supply and therefore prevent bottlenecks.

The manufacturers account for about 55% of UK production and the downtime could now occur while the country still enjoys access to the European customs union. While the plants involved would have to remain open should Brexit occur later this year, this leaves them facing the very disruption they were originally looking to avoid.

Shutdowns are usually organised months in advance and carmakers are unable to reorganise them at such short notice due to workforce holidays and contractors, who are brought in to do maintenance while production is halted.

Rolls-Royce Motor Cars chief executive Torsten Müller-Otvös said it would be ‘impossible’ to move the date of the BMW-owned brand’s shutdown at its Goodwood facility. ‘We have pulled forward refurbishment work for our paint shop, maintenance work, everything,’ he told the Financial Times at the Geneva Motor Show. ‘Everything that normally happens in August is pulled forward to April, and I can’t cancel that overnight, it’s impossible.’ He said a ‘short delay’ to Britain’s departure would be a “worse result” for the company than leaving on 29 March.

Honda, which planned a six-day shutdown, said its planned non-production days in April were part of a broad set of contingency measures that could not be easily changed. ‘Any extension of Article 50 must be purposeful and long enough to give business stability,’ it said.

BMW is still preparing for the worst-case scenario of a no-deal Brexit. The company, which earlier this month suggested it could move some production out of the UK in the event of a hard Brexit, added that it is preparing for a postponement of the UK leaving the EU by exploring every possible scenario ahead to make sure it is ready.

Should the UK leave the EU without a deal, cars would be subject to a 10.6% tariff, although the Government has announced that vehicle parts would be excluded from any additional costs.