January 31, 2019 / 1:31 PM / 5 months ago

Factbox - With Brexit looming, UK Plc triggers emergency measures

(Reuters) - With Britain at risk of leaving the European Union without a divorce deal, many of its biggest companies have lost patience and started to restructure their operations to prepare for the chaotic fallout that could ensue.

FILE PHOTO: Rain clouds pass over Canary Wharf financial financial district in London, Britain July 1, 2016. REUTERS/Reinhard Krause/File Photo

Prime Minister Theresa May is battling to break the deadlock after lawmakers rejected the divorce deal she negotiated with Brussels, but Britain is currently on course to leave the world’s biggest trading bloc without a deal on March 29.

Companies are now rethinking the way they work, from stockpiling parts to halting production, moving distribution centres and testing new trade routes, in case customs checks jam up the normal operations.

Below are some of the most detailed examples given of the changes being made ahead of the biggest shift to Britain’s trading arrangements in almost half a century.

PHARMACEUTICALS:

The highly regulated drugs sector is one of the most vulnerable to a no-deal Brexit due to its pan-European supply chains and need for regulatory oversight.

More than 2,600 drugs have some stage of manufacture in Britain and 45 million patient packs are supplied from the UK to other European countries each month, while another 37 million flow in the opposite direction, industry figures show.

Major companies including AstraZeneca, Sanofi and Novartis have said they will increase stockpiles of medicines.

GlaxoSmithKline, Britain’s biggest drugmaker, and Astra are seeking to re-test and certify medicines in the UK and the EU, while GSK is updating packaging, amending importation licences and securing warehousing.

GSK says the cost to implement such changes could be up to 70 million pounds over the next two to three years, with ongoing costs put at around 50 million pounds per year.

MANUFACTURERS, RETAILERS AND STOCKPILING:

Stockpiling of parts and finished product has been the default option for manufacturers and retailers who do not know how to plan for a future trade relationship with the EU.

Warehouse owners including LondonMetric and Wincanton have seen a surge in demand.

Unilever said it was stockpiling a few extra weeks of inventory on both sides of the English Channel, including deodorants that are made in the UK and ice creams made in continental Europe.

Telecoms group BT is building up stock of broadband hubs and set-top boxes in case there are delays in the supply chain, and says it is amending contracts to ensure it can serve customers through its European subsidiaries and will not have problems moving data about.

Britain’s biggest supermarket Tesco said it had increased stockholdings of items such as bottles, packets and tins, and had clear plans for each product category.

However stockpiling can only go so far. Rival Sainsbury’s, importing about 30 percent of food from continental Europe, said the country only had enough storage space to hold goods for a few days. Neither firm can hold much fresh food.

In clothing, Joules says it will have an EU-based distribution centre ready by April. It is bringing ranges into Britain earlier than normal, hedging currency and preparing to handle export documents.

Other companies to increase stock ahead of March 29 include engineers Rolls-Royce and Airbus, luxury group Burberry and food and drink company Nestle.

AIRLINES:

British and European airlines have had to make a number of changes to continue flying after Brexit. British groups such as easyJet have secured a license and air operator’s certificate in an EU member, while the Hungary-based budget airline Wizz Air has secured a British license.

Airlines and travel groups are also having to make sure that they will still be majority-owned by EU nationals once British shareholders are excluded from the numbers. EasyJet, Ryanair and British Airways-owner IAG are among the groups likely to be most affected.

CARMAKERS:

Britain’s car industry, one of the country’s few manufacturing success stories, employs over 850,000 people and generates annual turnover of $110 billion. The industry is nearly entirely foreign-owned after international names such as Nissan built plants in Britain to export into Europe.

As well as stockpiling parts and finished vehicles, car makers such as BMW’s Mini and Honda have moved their annual maintenance shutdown period to around the EU departure data to soften the blow of any chaotic exit.

Bentley, which has taken more storage space, has also signed up to use the northern English port of Immingham to bring in certain parts while Aston Martin has identified alternative shipping and air routes.

BMW is looking for lorry parking areas and warehousing on both sides of the channel, and investing in IT systems to handle any new red tape. On the paperwork front, Aston Martin joined Skoda in dropping the British certification agency as the body to approve its cars.

TRANSPORT:

Dover is Britain’s most important gateway to Europe, handling 17 percent of the United Kingdom’s goods trade. Up to 10,000 trucks a day pass through with everything from perishable food to medicines and the parts used by the car plants.

Truckers have warned that the introduction of customs checks could lead to days of delays. The government is spending more than 100 million pounds chartering extra ferries while one small port 20 miles from Dover is being extended to increase capacity.

Some companies and logistics providers are trialling different ports in the north and south of England while Eddie Stobart Logistics is running a rail service from the London port of Tilbury to Daventry where many retailers have distribution centres.

FILE PHOTO: A pro-Brexit demonstrator is seen among other protesters outside the Houses of Parliament, in Westminster, London, Britain January 29, 2019. REUTERS/Peter Nicholls/File Photo

British ferry and shipping freight operator P&O said it would shift the registration of its British ships to Cyprus to keep its tax arrangements in the bloc.

HEADQUARTERS

Both Sony and Panasonic are moving their headquarters from Britain into the EU. Technology company Dyson, led by Brexit backer James Dyson, is moving its HQ to Singapore but it says this is not related to Brexit. International banks have set up subsidiaries across the bloc to ensure they can continue to serve clients after March.

Reporting by Kate Holton and Paul Sandle; Editing by Catherine Evans

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