Airbus said it will need to reconsider its footprint, investments and dependency on the UK in the event of a hard Brexit, when the UK leaves the European Union (EU).
Detailing its concerns in a briefing paper published June 21—almost two years after the Brexit referendum—the Toulouse-based manufacturer said the UK leaving without a deal on a transition process, as well as exiting the European single market, the customs union and the European Court of Justice (ECJ), would heavily impact its UK operations and its wider supply chain.
Airbus employs 14,000 people across 25 sites in the UK and builds the wings for many airliners at Hawarden in North Wales, but said the frictions caused by a hard Brexit would see production severely disrupted. Hard Brexit, it said, would lead to slowdowns in the flow of parts and discontinued airworthiness, as an exit from the ECJ means Britain will have also left purview of the European Aviation Safety Agency (EASA).
The document revealed the growing frustrations of the aerospace industry, which has seen little sign of progress in the two years of negotiations between the British government and the EU.
Uncertainties in the supply chain, it said, would force the company to carry a stock of components worth €1 billion ($1.2 billion), but this would be difficult to achieve given the already steep ramp-up demands on the A320 and A350 families. Airbus said its industrial capabilities are already running at full capacity.
“With no spare capacity left over years to come, every disruption to production would most likely turn into an unrecoverable delay,” the company said.
One week of delay in production, it suggested, could result in a €1 billion weekly loss in turnover.
The company suggested the disruptions associated with a no-deal Brexit situation are likely to add up to several weeks, which it said could translate into “a multi-billion impact on Airbus.”
It said a hard Brexit must be avoided. If not, Airbus said capabilities could be repatriated—potentially to China—and the company’s research and development work, including the Wing of Tomorrow program, would have to be “revisited.”
“This extremely negative outcome for Airbus would be catastrophic,” Airbus said, but would also severely undermine UK efforts to keep a “competitive and innovative aerospace industry.”
Even an orderly Brexit, with a transition and trade agreements in place, would still “pose a significant amount of risk,” but would be better outcome than a no-deal. The company is also concerned that short-lead times to prepare for any new relationship could bring risks to data systems, and supplier readiness and could cause 1-2 weeks of production disruption.
Until any new EU/UK relationship is understood, the manufacturer said it will “carefully monitor” any new investments in the UK and should “refrain from extending” its UK supply base.
The company said concerns about the customs union and the UK’s future regulatory framework with the EU are “major issues” that will determine its future strategy, adding that these issues “need to be addressed urgently.”
Airbus is also concerned about the expected extra costs associated with trade procedures. It cited an “Organization for Economic Cooperation and Development” study, which suggests the extra costs associated with Brexit could add between 2%-15%. Airbus said this could potentially translate to up to €1 billion extra a year for the Airbus UK operation.
The document emerges months after the company’s CEO Tom Enders warned in January that Brexit represented a “dangerous protectionist trend” that would “weaken the industrial links between the EU and the UK.”