Despite tariff free movement of civil aircraft and aircraft component parts between the UK, EU, US and elsewhere covered by the 1980 WTO agreement* Airbus is right to bang the drum to get the message across to the UK government and EU that priority actions are required now to ensure that Airbus component parts movement between the UK and the EU and vice-versa will not be suffer additional process requirements, customs delays and red tape after Britain leaves the EU next year.
Yesterday, on the BBC Radio 4 Today Programme, Katherine Bennett, senior vice-president of Airbus UK raised this very serious issue again, warning of the urgency of establishing a principle very quickly that ensures movement of Airbus parts between component supplier and between Airbus plants in the UK and future EU area do not suffer any delays due to Brexit.
The four Airbus home plants across the EU all use a ‘just-in-time’ principle of working meaning that delivery of components from suppliers and delivery of finished product such as the wings that are manufactured in Broughton, North Wales, these are then delivered to Toulouse in France or other plants for final assembly. But despite WTO tariff freedoms having already been established, Airbus remains seriously concerned that Brexit will cause customs delays and additional process requirements. It is these genuine concerns that Katherine Bennett and other senior managers in the company are now highlighting and importantly most of all, the lack of clarity from the UK and EU.
In practice Airbus should be able to continue to operate in the post Brexit world just as it does today. Whilst it will clearly be impacted factors over which it has no control such as currencies it does not face the risk of additional tariffs on movement of goods. Assuming that there is no meaningful trade agreement established between the EU and UK the problem is not that even though movement of parts for Airbus is not a tariff concern the company might, from a customs point of view, need to go through the same process as everyone else.
As things currently stand, no differentiators have yet been put in place by the UK and EU that will ensure tariff free goods such as those that Airbus and its component supply base are involved, will not be seriously delayed by being required to go through a new customs process that could lead to serious delays.
What Airbus do not want is to be put in a costly and unnecessary position of stockpiling parts ahead of Brexit or of putting in an additional system of process. Tom Williams who is the chief operating officer of the Airbus commercial aircraft manufacturing arm has also been raising awareness of the seriousness of the issue of customs delays. Recently he was reported as saying that “the clock’s running pretty fast” on the need for certainty over the way borders will operate” for ten movement of Airbus components and finished product.
Due to long lead times that are a feature of the aerospace business it seems that with the UK officially leaving the EU in just over twelve months Airbus needs to make almost immediate decisions on whether to spend more on parts now in order to build-up extra available component stock. He told staff recently that “If we think there is going to be a kind of gumming up of the docks and the airports, certainly in March of next year and during a transition period, then clearly from our point of view we are going to have to start ordering additional components now, because it is less than 12 months away. And that is at a time when all of our suppliers are already pretty busy”.
On the Today Programme yesterday, Catherine Bennett emphasised that Airbus would have to decide very soon about “pressing the button” on stockpiling. She said that “We spend £5bn a year on the UK supply so it is really important the parts don’t get held up in warehouses”. However, whilst confirming that Airbus was in continuing discussions and dialogue with government and EU, she emphasised the seriousness of the issue by example suggesting that as the firm operated a “just in time” supply chain process this meant that even a three-hour delay at Dover [in customs] would be “a critical issue” for the company. Further emphasising her concern she said “We need conditions right for us, we just don’t need these [additional] burdens which may make Airbus think differently [about its UK base]”.
The points above are well made and unless concerns such as these are quickly sorted fears over the long term future of Airbus manufacturing are bound to increase. The Government should take note that concerns such as this are deep and real and that Airbus plants in Continental Europe would love the opportunity of taking work away from the UK. The UK has achieved manufacturing excellence in wing manufacture and it is imperative that the government wastes no time ensuring that no customs or other post Brexit obstacles will be put in the way that damage continuing UK manufacturing of wings and in ensuring the long term future of this superb centre of wing manufacturing excellence. For the moment though, Katherine Bennetts’ words of there being “a lack of clarity that we urgently need on what will happen on important matters such as customs regulation” must be made a priority for government.
(*Note – the 1980 plurilateral agreement on trade in civil aircraft that has been signed by 32 members of the World Trade Organisation eliminated import duties on all aircraft, other than military aircraft, as well as on all other products covered by the agreement including civil aircraft engines and their parts and components, all components and sub-assemblies of civil aircraft and flight)
CHW (London – 6th March 2018)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785