November 20, 2018 / 1:00 PM / a month ago

UK Plc prepares for messy Brexit as clock ticks down

LONDON (Reuters) - British companies selling everything from washing machines to flights, food and mortgages plan to spend tens of millions of pounds in case the political brinkmanship gripping the country leads to a disorderly Brexit.

People walk past a temporary sculpture installed to mark the centenary of the Armistice which ended the First World War, in the Canary Wharf financial district of London, Britain November 1, 2018. REUTERS/Toby Melville

With barely four months until the world’s fifth largest economy leaves the European Union, a raft of major companies set out plans on Tuesday to counter any trade delays and downturns that could stem from a no-deal scenario.

Electrocomponents (ECM.L), which stocks more than half a million industrial and electronics products, said it would spend 30 million pounds ($38.6 million) in the six months to the end of next March to increase its holding of high-turnover goods in Britain and Europe.

AO World (AO.L), the online electricals and white goods retailer, might increase stock to mitigate supply chain friction while Compass (CPG.L), the world’s biggest catering firm, is looking to build inventory and vary menus before March 29.

“We are planning very seriously for all scenarios,” said Chief Executive Dominic Blakemore of Compass which provides meals for train customers, hospitals and corporate headquarters.

“We have been working with our suppliers for quite some time to think about how we carry a bit more inventory, how we source supply and how we vary our menu.”

Britain’s vote to leave the world’s largest trading bloc has created a raft of challenges for companies, with financial services groups shifting some assets and people to Europe while manufacturers hunt for storage space to stockpile parts.

Supporters of Brexit say once it has left the country will be free to negotiate new trade deals around the world and ditch regulations they say hamper growth.

But mounting tensions in Westminster, where lawmakers from all parties are opposed to Prime Minister Theresa May’s Brexit deal, have sparked fears Britain may leave the EU with no deal, prompting customs checks that clog up borders and fracture long-standing supply chains.

Issues being addressed include stockpiling, changes in suppliers and production, and changes to regulation.

READY OR NOT?

Hours after a handful of companies put out their plans at 0700 GMT, the Bank of England had some sobering words.

“I have the impression from talking to businesses (...) that most are not prepared for a no-deal Brexit, and don’t know really how to,” Bank policymaker Michael Saunders said.

Those companies with a plan are pushing ahead.

British low-cost airline easyJet (EZJ.L), which carried 88.5 million passengers in its latest financial year, has changed its legal structure and secured new operating licenses to enable it to continue flying into Europe.

It is now working to change its shareholder base so that by Brexit day more than 50 percent of its investors will be based in the European Economic Area when excluding Britain. That measure currently stands at 47 percent.

“Basically what me and Andrew (Findlay, CFO) are going to do right now after today is continue to go and see European shareholders and talk to them about the story of easyJet,” Chief Executive Johan Lundgren told reporters as he presented results.

Many company executives in Britain have previously been reluctant to stray into politics for fear of angering customers, but with time running out they are starting to speak out.

AO World said it may need to increase inventory in the short term. It currently holds enough stock in Britain for 35 days.

Halma (HLMA.L), a maker of safety equipment for the medical, infrastructure and resource markets, set out in detail how it could be affected, including higher costs and inflation, greater liabilities for pensions and disruption to its work force, supply chain and regulation.

CEO Andrew Williams said the group had some flexibility because its string of companies around the world could work together to share production if required.

Other companies remained more coy.

The owner of Clydesdale and Yorkshire Bank (CYBGC.L) said the “inherently uncertain” environment was casting a shadow over the country’s short term economic prospects.

Writing by Kate Holton; additional reporting by James Davey and Sarah Young in London and Arathy Nair and Muvija M in Bengaluru; Editing by Keith Weir

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