Unbearable': European Firms Face Brexit Uncertainty -- Update

Fecha : 17/01/2019 @ 18:36
Fuente : Noticias Dow Jones
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Unbearable': European Firms Face Brexit Uncertainty -- Update

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By Denise Roland and Robert Wall 

British Prime Minister Theresa May's failure to get U.K. parliamentary approval for a deal to split the country from the European Union adds significant pressure on companies as they plan for the now greater possibility of an abrupt and disorderly exit.

Lawmakers on Tuesday soundly rejected Mrs. May's agreement with Brussels and approved by her cabinet, putting the process in jeopardy ahead of a March 29 deadline to leave. The repudiation has opened up a variety of possible outcomes considered unlikely until recently, from Britain crashing out of the EU without a deal to a new referendum on whether to leave at all.

With the deadline just weeks away, many big companies find themselves making contingency plans for disaster.

"The worst case for us is not that we sell a little less fizzy pop," said Hugo Fry, managing director of Sanofi SA's U.K. operations. "It's patients don't get medicine." He has spent almost two years planning how to insulate the French drugmaker from a messy Brexit.

"The scenario of a no-deal Brexit is less and less unlikely," French Prime Minister Édouard Philippe said Thursday as his government activated its contingency plans for a no-deal Brexit. The senate approved on Thursday evening a new law allowing the government to take Brexit-related decisions by decree over the next few weeks. The government plans to give British nationals living in France one year to obtain the necessary legal documents for them to stay in the country, and will invest EUR50 million ($57 million) in new border infrastructures, he added, saying French authorities were also in the process of recruiting nearly 600 customs officers, he said.

"Our goal is to meet our obligations and to ensure that the lives of our fellow citizens, and in some ways of British nationals living in France, is impacted as little as possible," Mr. Philippe said.

Many British business leaders never liked Mrs. May's deal. Executives from large international firms with big operations in the U.K. or Europe had pushed for no exit at all in the 2016 referendum and then lobbied for the U.K. to at least remain in a customs union with the EU, its major trade partner. But that didn't happen.

Still, executives viewed Mrs. May's agreement with Brussels as better than no deal because it would end 2 1/2 years of uncertainty that has made investment decisions difficult and raised the threat of major new obstacles and costs for exports and imports. Now, even that is at risk, as Mrs. May tries to cobble together a new compromise Brexit deal after surviving a no-confidence vote on Wednesday. The EU has given no indication it would make further concessions.

"There are no more words to describe the frustration, impatience, and growing anger amongst business," said Adam Marshall, director general of the British Chamber of Commerce in a statement after the vote. "Basic questions on real-world operational issues remain unanswered."

A no-deal Brexit threatens time-consuming customs checks and potentially expensive tariffs on goods that now move across the English Channel seamlessly and tax-free. Many big companies have already spent millions of dollars locking in extra parts and storage space ahead of time, and planning out alternative supply lines in case confusion overwhelms British and European ports.

"You have to check every eventuality," said Mr. Fry of Sanofi. "Is there something that, taking a certain route, [might] upset a medicine?"

Mr. Fry technically runs the French company's U.K. business, but he has taken on the unofficial role of chief Brexit officer. He and a team that now numbers 20 have been planning how to avoid catastrophe since soon after Britons voted in June 2016 to exit from the EU.

Sanofi supplies drugs and vaccines to the U.K. mostly from plants located elsewhere in Europe. Mr. Fry said his biggest worry is that without a deal, that medicine will be subject to time-consuming border checks. Sanofi supplies around a fifth of Britain's insulin, among other medicines.

Lantus, one of Britain's most widely prescribed brands of insulin, is made by Sanofi in Frankfurt. Once a week, doses destined for Britain travel by refrigerated truck to Calais, France. Those trucks cross to Dover in the south of England, either by ferry or the Channel Tunnel, and then drive to a distribution center in the north of England that supplies every pharmacy in the U.K. That journey takes two or three days.

Mr. Fry set Sanofi's contingency plans in motion more than a year ago to hold to that schedule and prevent any shortages. Ahead of the Brexit deadline, Sanofi ramped up its production of Lantus in Germany, sending an extra six weeks' worth of supply to the U.K. The U.K. government has ordered all drugs makers to do so.

The company is also testing out alternative ferry routes so it has other options if Dover, one of Europe's busiest ports, becomes jammed up. It has started sending some containers through Harwich in eastern England and Newhaven, south of Dover. Mr. Fry has overseen the same process for dozens of other U.K.-bound Sanofi products made in plants in other parts of Europe.

The Brexit bite also goes the other way. Until recently, Sanofi used its U.K. plant in Haverhill, in eastern England, as a hub for final packaging and quality testing for most of its rare-disease drugs. Mr. Fry now uses a Sanofi site in Waterford, Ireland, instead because it is unclear whether quality tests performed in the U.K. will be recognized in the rest of Europe after Brexit.

"A lot of these decisions are not reversible," Mr. Fry said.

British aircraft-engine maker Rolls-Royce Holdings PLC is considering bypassing British ports altogether. The company ordinarily dispatches its big aircraft engines by truck to European plane maker Airbus SE on the continent. One option to avoid any Brexit-related disruptions is trucking the engines -- which can each weigh more than 16,000 pounds -- to an Airbus facility in Wales, part of the U.K. There they would hitch a ride in a giant Beluga cargo aircraft that Airbus uses to ferry other large parts from its wing-production facility to Toulouse, France, said a person familiar with the planning.

Airbus is now building its A350 long-haul jets at a record pace of 10 a month. All are supplied with British-made wings and powered by Rolls-Royce engines. Any problems getting the engines on time could pose a risk of delayed plane deliveries and angry airline customers.

"The uncertainty is pretty unbearable," Airbus Chief Executive Tom Enders said last week.

--Noemie Bisserbe contributed to this article.

Write to Denise Roland at Denise.Roland@wsj.com and Robert Wall at robert.wall@wsj.com

 

(END) Dow Jones Newswires

January 17, 2019 19:21 ET (00:21 GMT)

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