Companies in Britain prepare for disorderly Brexit as talks stall
Companies in Britain prepare for disorderly Brexit as talks stall
Britain is aiming to agree with the EU on December 14 to move the Brexit talks on to the second phase. This would focus on trade and a two-year transition deal to smooth the departure after March 2019. But the timetable has been thrown into doubt after discussions broke down in Brussels on Monday.
Senior executives in the financial services sector, which accounts for about 12 percent of the economy, said May’s efforts to secure a transition deal had come too late and they had no choice but to start restructuring.
Big supermarkets such as Tesco and Sainsbury’s have been working with suppliers to identify potential delays, shortages or price rises. They have lined up alternative providers, according to suppliers and sources in the industry.
The uncertainty is particularly painful for the manufacturing sector as low margins make it risky for them to restructure unless it is essential. They have been holding off on investment but are preparing for new certification that would allow them to sell in Europe if there is no deal.
“The delay is so great and the uncertainty is so great that companies have no choice but to start triggering their plans,” the head of one of Britain’s largest companies said.
Britain and the EU are working to get talks back on track this week but the chairman of one large international bank said its executives had decided to plan for the worst at a conference call on Tuesday.
“The question is no longer whether we are moving (operations to the EU), it is a question of how big those moves are?,” he said.
Like other executives, he had been asked by his board and the government not to divulge their thinking.
The chairman said the bank has started discussions with customers about rerouting client activity to European hubs, including rewriting thousands of contracts.
Senior employees were told last month if they had to relocate to Europe, he said.
Another senior executive at a large US bank said that he was increasingly concerned that May’s government could collapse after the Brussels talks broke down over a dispute about the Irish border, adding to the uncertainty.
“We are at the maximum point of danger,” he said.
The financial sector needs extra time to make sure its clients are prepared. For instance, a British bank opening a subsidiary in Europe may need its clients to adopt a new sort code throughout their own supply chains.
In other sectors, companies are making smaller changes that would enable them to operate in Europe after Brexit, from preparing compliance changes to drawing up shadow supply chains and looking for additional warehouse space.
Food retailers are lining up alternative suppliers in Britain or outside the EU in case delays at borders or new tariffs disrupt deliveries. Around 30 percent of Britain’s food and drink comes from the EU.
Some changes would need to be made early next year in time for the 2019 departure. Changing a fresh fruit supplier could require a lead time of a year, depending on the growing cycle.
Ali Capper, a partner in Stocks Farm in Worcestershire, central England, and a chair of the Horticulture and Potatoes Board at the National Farmers Union, said there were signs retail customers were requesting more British produce.
Ireland provides almost 70 percent of UK beef imports, or 270,000 tons a year. Were tariffs or border delays to make Irish beef less competitive, supermarkets could look further afield, for instance to Argentina.
Many manufacturers are unwilling to sign off on new plans until they know how Britain will trade in the future.
The drugs sector has been among the first to move so they can comply with EU regulations. GSK and AstraZeneca have already set up new facilities in mainland Europe to test batches of drugs made in Britain.
Autos and aerospace firms are focusing on certification. According to the aerospace and defense trade body, ADS, some companies are considering applying to the European Aviation Safety Agency for a status that would enable them to sell in the EU if Britain was no longer a member state.
Japanese carmaker Honda, which builds around 8 percent of British cars at its plant in Swindon, is considering increasing its warehouse capacity in Britain and stock levels to counter any new border delays.
Manufacturers reluctance to sign off on big plans has had a knock-on effect on companies in the supply chain.
“The biggest impact we see is a general unwillingness to make investment and capacity decisions as result of the continued uncertainty,” said Stephen Cheetham, owner of PK Engineering of Hereford, a supplier of components to the aerospace and scientific industries.
“We would expect continued paralysis and short-termism until a trade deal is finalized,” he said.
Having a transition deal will allow businesses to survive the two years after Brexit by allowing them to defer any big decisions until the final parameters of Brexit are worked out, said Andrew Bonfield, finance director of National Grid and chairman of the 100 Group of finance chiefs.
“It’s about the avoidance of a cliff edge,” he said.
Can a hungry Mali turn rice technology into ‘white gold’?
- Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change
- Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983
BAGUINEDA: When rice farmers started producing yields nine times larger than normal in the Malian desert near the famed town of Timbuktu a decade ago, a passerby could have mistaken the crop for another desert mirage.
Rather, it was the result of an engineering feat that has left experts in this impoverished nation in awe — but one that has yet to spread widely through Mali’s farming community.
“We must redouble efforts to get political leaders on board,” said Djiguiba Kouyaté, a coordinator in Mali for German development agency GIZ.
With hunger a constant menace, Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change.
Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983. It involves planting fewer seeds of traditional rice varieties and taking care of them following a strict regime.
Seedlings are transplanted at a very young age and spaced widely. Soil is enriched with organic matter, and must be kept moist, though the system uses less water than traditional rice farming.
Up to 20 million farmers now use SRI in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast, said Norman Uphoff, of the SRI International Network and Resources Center at Cornell University in the US.
But, despite its success, the technique has been embraced with varying degrees of enthusiasm. Uphoff said that is because it competes with the improved hybrid and inbred rice varieties that agricultural corporations sell.
For Faliry Boly, who heads a rice-growing association, the prospect of rice becoming a “white gold” for Mali should spur on authorities and farmers to adopt rice intensification.
The method could increase yields while also offering a more environmentally-friendly alternative, including by replacing chemical fertilizers with organic ones, he said.
He also pointed out that rice intensification naturally lends itself to Mali’s largely arid climate.