West Midlands employers demand Brexit certainty - but even Theresa May doesn't know what's going to happen - Jonathan Walker

West Midlands employers demand Brexit certainty – but even Theresa May doesn’t know what’s going to happen – Jonathan Walker

Two major Midland employers have issued warnings about Brexit.

Mondelez International, the owner of Cadbury, revealed it was stockpiling ingredients, chocolates and biscuits in preparation for a “hard” Brexit.

And Ralf Speth, chief executive of Jaguar Land Rover, warned a hard Brexit would cost the business more than £1.2 billion a year – and said it could not “safeguard” its 40,000 UK employees until it knew that the UK would sign the right type of trade deal with the EU.

None of this is very reassuring for staff working at Jaguar Land Rover (JLR) plants in Castle Bromwich, Solihull, Staffordshire and elsewhere, or for workers at Cadbury’s plant in Bournville.

The warnings had two important things in common.

First, both businesses were concerned about their ability to import supplies from EU countries.



Jaguar Land Rover Chief Executive Ralf Speth

When we think about trade, there’s a natural tendency to focus on the ability of UK firms to sell things abroad. And of course, JLR and Cadbury both want to continue exporting.

But for many firms, finding reliable suppliers is also essential to turning a profit.

If Cadbury can’t import ingredients, or JLR can’t import components, then production grinds to a halt and there is nothing to sell.

EU membership gave UK businesses a much wider selection of potential suppliers to choose from. A firm in Stuttgart could ship items to a UK plant almost as easily as a firm in Stourbridge.

There were no delays at borders, no tariffs to pay and any relevant regulations (eg, regarding food production) were the same in both countries.

Many larger UK-based manufacturers took full advantage of this. It made good business sense.

Taking that supply chain away now would be disastrous for them.

And even if trade continued in some form, existing supply chains would become unworkable if delays were introduced in the process.

In other words, it’s not enough for JLR to be able to import components from the EU. It also needs to get them into the country at short notice when needed – without any delay at the borders.



Cadbury Creme Eggs

Dr Speth explained: “Just one part missing could mean stopping production at a cost of £60m a day. That is a huge risk. We depend on free, frictionless, seamless logistics.”

The current arrangements are possible today because the UK is a member of the Customs Union, thanks to EU membership. It means items can be transported between EU countries (including the UK for mow) with more or less no checks or restrictions.

But we don’t know what sort of arrangements will be in place after Brexit takes place on March 29 next year.

This brings us to the second thing that the two warnings had in common.

Neither Cadbury or JLR were saying Brexit would, necessarily, be a disaster.

What they were complaining about was a lack of certainty.

There are fewer than 200 days to go before we leave the EU. They include the Christmas and New Year break.

Businesses still don’t know what to expect when Brexit takes place. Will Dr Speth’s worst fears be realised? Or will arrangements be in place to allow “free and frictionless” trade in goods between the UK and EU?

He still doesn’t know, and that’s bound to cause some frustration.

Perhaps that’s why he chose to issue his warning at a car industry summit at Birmingham’s ICC, attended by Prime Minister Theresa May. It made him very hard to ignore.

Other firms have expressed similar concerns. They include Nissan, which has a car plant in Sunderland and has the same supply-chain worries as JLR.



Michel Barnier, the EU’s chief negotiator

Unfortunately, Mrs May is in no position to offer UK businesses any clarity.

Michel Barnier, the UK’s chief negotiator, has said a Brexit deal is possible within six to eight weeks. If that happens then perhaps we can all breathe a sigh of relief.

But there’s speculation at Westminster about whether Mrs May will be able to get a deal through the House of Commons. Labour has made it clear it will vote against a deal based on the so-called Chequers plan, the Government’s current preferred option, and some Tory MPs will join them – although some Labour MPs could also rebel by backing the Government.

In other words, nobody really knows whether Mrs May would be able to win the vote.

It’s also been reported that the EU is rejecting the Chequers plan, and will try to force Mrs May to accept other arrangements. It’s impossible to predict how Parliament would respond to that.

Some Conservative MPs are said to be plotting to sack Mrs May.

And there are signs that Labour may be coming round to the idea of backing a second EU referendum, after Shadow Chancellor John McDonnell said his party was keeping the option “on the table”.

Nobody at Westminster knows what to expect, so it’s no wonder employers are wondering what the future holds.

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