European aviation giant Airbus recently gave out a warning that it could be forced to exit from Britain if it leaves the European Union without any transition deal. The transition deal refers to an agreement which defines the framework of UK’s relationship with the rest of Europe. If the UK were to leave the European Union without this transition deal, then it could face a situation where UK businesses could face tariffs and lengthy bureaucratic delays while trading with the EU block.
Airbus is obviously worried and has warned that the UK should continue to be in customs union unless a proper replacement for the same is found. The company would review its dependency on the UK and monitor any new investments if it leaves the European Union without any deal.
Furthermore, it would cause critical disruption and interruption in the flow of parts to the production centers of Airbus which will result in a reported weekly loss of 1 billion Euros in turnover. This would be cataclysmic for the aviation giant and the industry as a whole.
The company said it would discard its future plans related to the production of aircraft wings in the factories of UK and transfer its production to North America, China, or any other place in the European Union. If the company continues to operate in the UK under WTO rules, it would result in huge losses for the company. This has threatened thousands of jobs of British people in the UK. The ‘no deal scenario’ has put Airbus’ future in the UK at risk.
Impact of Airbus on the UK
Airbus is a huge aviation giant that produces and sells aeronautical products across the world. It is the second largest aerospace company in the world with almost 70 billion Euro in revenues. It is also a substantial civil aerospace exporter in the UK.
The UK constitutes a major part of Airbus’ global operations. The company generated approximately 720 million pounds from its operations in the UK in 2015. Its wages and salaries bill for its 15,000 strong UK workforce came to around 825 million pounds. Thus, the company’s total direct and indirect contribution to the UK economy is estimated to be over 7.8 billion pounds.
Airbus spends more than 5 billion pounds with UK suppliers each year. The supply chain made up of more than 4,000 companies. It provides 15,000 jobs directly to the people of Britain across its 25 sites and further 110,000 jobs through its supply chain support system which means it also provides indirect employment to those persons who are not directly associated with the company.
Consequences
The UK faces serious consequences if it were to exit EU without a transition deal. The uncertainty for businesses would be enormous and cause panic all around. Even more importantly, this would discourage any new investment in the country till all the Brexit related mess is sorted out. Airbus warning comes at an opportune time for the British Government to work towards an amicable settlement. Otherwise the divorce could lead to a mass exodus of companies from the UK.
