Rolls-Royce is stockpiling parts as Brexit chaos threatens 'national crisis'

CNN/Stylemagazine.com Newswire | 12/12/2018, 12:42 p.m.
Businesses are sending a clear message to UK politicians: Stop messing around. Companies and industry groups in Britain issued strident ...
Rolls-Royce is stockpiling parts as Brexit chaos threatens 'national crisis'

By Ivana Kottasová, CNN Business

(CNN) -- Businesses are sending a clear message to UK politicians: Stop messing around.

Companies and industry groups in Britain issued strident warnings against further political turmoil Wednesday after a challenge to Prime Minister Theresa May's leadership threatened to tip the country into crisis over how and when Brexit will happen.

Underscoring the high stakes for business, a major UK manufacturing firm confirmed it has activated contingency plans. Airplane engine maker Rolls-Royce (RYCEY) said that it has begun stockpiling parts to help minimize the damage from a disorderly Brexit.

There are only 107 days to go before Britain is scheduled to leave the European Union, but parliament remains deeply divided on how to break with Britain's biggest trading partner.

May has failed to secure support for the divorce deal she negotiated with Brussels, and now faces a rebellion from within her own party. A vote later on Wednesday will determine whether she can continue as prime minister.

"The utter dismay amongst businesses watching events in Westminster cannot be exaggerated," Adam Marshall, director general of the British Chambers of Commerce, said in a statement.

"Our firms are worried, investors around the world are baffled and disappointed, and markets are showing serious strain as this political saga goes on and on," he added.

Companies across the country have already taken steps to prepare for Brexit.

Big banks including Deutsche Bank (DB), Goldman Sachs (GS) and Citi (C) have moved parts of their business out of the United Kingdom.

Panasonic (PCRFY) said in August that it would move its European headquarters to Amsterdam. Other firms have opened offices in the European Union to ensure they can continue to do business.

And German engineering group Schaeffler (SCFLF) said it was going to close two plants in the United Kingdom because of the uncertainty.

Fears over 'no deal'

The most worrying scenario for business is one where Britain crashes out of the European Union without a deal, leading to new trade barriers.

Aerospace giant Airbus (EADSY) has said it could be forced to quit the country if there's no deal on EU trading arrangements. Carmakers such as Nissan (NSANY), BMW (BMWYY) and Jaguar Land Rover are also heavily exposed.

Mike Cherry, chairman of the Federation of Small Businesses, said that confidence among the group's members has fallen to its lowest level since the financial crisis.

"We don't know what economic environment we'll be operating within in only 100 days' time ... that makes planning ahead impossible," he said, adding that firms are "crying out for some certainty about the future."

Economic consequences

The deepening confusion over Brexit comes at a terrible time for the British economy.

Data from the Office for National Statistics show the UK economy grew just 0.1% in October compared to the previous month. Industrial production fell 0.6% and manufacturing slumped 0.9%.

Trading conditions are likely to worsen when Britain leaves the European Union on March 29.

The UK government's own analysis shows the economy will take a hit from any kind of Brexit. Crashing out without a deal would sink the UK economy into recession.

"Investment plans have been paused for two and a half years," said Dave Spicer, dean of the Business School at the University of Salford. "Unless a deal is agreed quickly, the country risks sliding towards a national crisis."