Companies in Britain prepare for disorderly Brexit as talks stall

Britain and the EU are working to get Brexit talks back on track this week, amid increasing protests against the country's exit from the European bloc. (Reuters)
Updated 07 December 2017
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Companies in Britain prepare for disorderly Brexit as talks stall

LONDON: Big companies are stepping up their plans in case Britain crashes out of the EU without a deal as Prime Minister Theresa May struggles to get talks back on track after a major setback.
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.


Dubai’s Al Maktoum airport expansion delayed until 2030

Updated 19 October 2018
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Dubai’s Al Maktoum airport expansion delayed until 2030

DUBAI: A major expansion of Dubai’s second airport Al Maktoum International will open in 2030, the emirate’s government said, five years later than officials had previously indicated.
The airport will be able to handle 130 million passengers a year when the first phase of a planned expansion opens in 2030, and ultimately more than 260 million passengers a year, the statement, released by the Dubai government’s media office on Thursday, said.
Dubai officials had previously said the first phase would open by 2025. The Dubai government media office could not immediately be reached outside working hours on Friday for comment on the reason for the delay.
Dubai expects to spend around $36 billion on the airport expansion and the Dubai World Central aviation complex where it is located.
Reuters reported on Oct. 3 that the expansion had been delayed and that the second stage of financing for the project had been delayed indefinitely.
It is not the first delay to the airport’s expansion. A smaller capacity increase is a year behind schedule, although it is expected to be finished this year. At that point the airport’s capacity is expected to be 26 million passengers per year.
The government also said that Dubai Aviation Engineering Projects (DAEP) had launched a tender to build the substructure for the airport, in what would be the largest single value contract issued for the airport to date.
Al Maktoum International, which opened to passengers in 2013, currently handles only a fraction of Dubai’s passenger traffic. It will be larger than main airport Dubai International, currently one of the world’s busiest, when the first phase of the expansion opens and eventually become the new base of Emirates airline.
Dubai Airports said in 2016 it was expanding Dubai International to handle 118 million passengers a year by 2023, 18 million more than initially planned, in case the development of Al Maktoum International was delayed.