July 17, 2018 / 12:52 PM / in 2 months

Rolls-Royce, frustrated at Brexit process, says stockpiling of parts could start in months

FARNBOROUGH, England (Reuters) - Rolls-Royce could start stockpiling parts in months if it looked like Britain was heading towards a disorderly exit from the European Union, the CEO of the UK engine-maker said, expressing frustration with the lack of clarity on the Brexit process.

Britain is due to leave the EU in less than nine months, but there is little clarity over its future relationship with the world’s biggest trading block, creating a headache for companies that rely on the smooth flow of goods and parts across borders.

Rolls-Royce CEO Warren East said the uncertainty meant the company was having to plan for all scenarios, including a disorderly or “no-deal” Brexit, where Britain would crash out of the EU without an agreement on future trading relations.

Asked by reporters at the Farnborough Airshow whether contingency plans meant Rolls-Royce had needed to stockpile parts, East said: “Not yet, but we might have to.”

He said the point that might have to begin was months away, adding: “Probably in Q4 this year.”

While UK Prime Minister Theresa May on Thursday published her blueprint for relations with the EU after Brexit, a so-called White Paper, she first needs to win the support of lawmakers for the plan, and then win agreement from the EU.

East said the White Paper had been “incrementally positive”, but there were still many unknown factors, and that a vote in the lower house of Parliament on Monday represented a step back.

May won a series of votes in the House of Commons, but only after bowing to pressure from Brexit supporters in her party to make amendments to the plans.

“It was very frustrating that having done a few interviews yesterday and talked about how incrementally positive it (the White Paper) was, at least half of it was undone,” East said.

“We can’t rely on anything,” he added.

Companies with large presences in Britain, such as carmaker Jaguar Land Rover and planemaker Airbus (AIR.PA), which makes the wings for all its passenger jets in Britain, have issued warnings about the risk to jobs and investment from Brexit.

Airbus said earlier this month its production could stop in the worst case scenario.

One of the major demands of the aviation industry is that Britain retains access to the European Aviation Safety Agency which issues safety approvals for all parts and planes.

Rolls, one of the biggest names in British manufacturing, laid out contingency plans in April to ensure there was no interruption in engine deliveries by moving the design approval process for its large jet engines from Britain to Germany.

Another part of Rolls’s planning has been to start taking a closer look at its supply chain and in particular the smaller companies, which Rolls’ representatives have been visiting to make sure they are ready to cope with a no-deal Brexit.

“We’ve started to engage in conversations with them (smaller suppliers) and looking at where some of the hotspots might be. We’ve got a bit of a heatmap of levels of risk,” Rolls’s president of civil aerospace Chris Cholerton said.

Reporting by Sarah Young; Editing by Mark Potter

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