June 22, 2018 / 12:06 PM / in a month

Breakingviews - Airbus’ Brexit certainty drive is wishful thinking

LONDON (Reuters Breakingviews) - Airbus’ Brexit certainty drive is wishful thinking. The nature of the Franco-German planemaker’s business means that earmarked transition periods after a UK exit could be too short. But its call for clarity on future arrangements will fall on deaf ears.

An Airbus A321LR arrives after its maiden flight during a presentation of the company's new long range aircraft in Hamburg-Finkenwerder, Germany, January 31, 2018. REUTERS/Fabian Bimmer/

Airbus has put a price on the two main Brexit scenarios. The group reckons that a no-deal exit from Europe would knock several billion euros off revenue that in 2017 was 67 billion euros, as weeks of disruption could delay its delivery of airplane wings which are predominantly made in the United Kingdom. A softer alternative, which includes an eventual trade deal and transitional arrangement, would still deliver a 1 billion euro annual hit to the company’s top line because it would not be concluded in time to be disruption-free.

These assessments should rattle UK politicians. Airbus employs 14,000 engineers in factories in north Wales, Portsmouth and Bristol. And given its extensive supply chains, a decision to quit the UK could put a further 110,000 non-Airbus jobs at risk. The company implies that this could be limited if UK politicians could offer a clearer glide path to the business environment post-Brexit.

Yet the government is no position to offer such clarity. UK politicians have recently been squabbling over the extent of their say on whatever deal is cooked up before Britain is due to leave the bloc next spring. But even if the government can come to an agreement on its future arrangements with Brussels, it’s unlikely that the level of detail Airbus is looking for will materialise – instead it will be shunted forward into the transition period following Britain’s departure in March 2019. The UK can’t even agree with the EU on how to avoid Brexit creating a hard border between Northern Ireland and Eire.

Were Airbus to know for sure that its worst-case scenario will transpire, it could at least depart with certainty. Such a move would come with a hefty price tag as Airbus would have to seek out new suppliers and could face multi-million euro penalties for breaking contracts with its UK partners. But the outlook on Brexit continues to be the likelihood of a suboptimal access to the single market and customs union without any say over its direction, and a lesser but tangible risk of a much more disorderly schism. As such, Airbus is holding off signing on new UK suppliers and partners. That need to err on the side of caution is one of Brexit’s biggest downsides.

Breakingviews

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