Hard Brexit will cost Ford $800m this year, carmaker warns | Business News
A hard Brexit will cost Ford as much as $800m (£614m) this year alone as a result of World Trade Organisation (WTO) tariffs and the weakening pound – one of the biggest individual company hits forecast so far from the UK crashing out of the EU.
Sky News has learnt that Ford executives, who have already outlined plans for a wide-ranging restructuring of its operations in Europe, have privately calculated that a no-deal departure would have a severe impact on the company’s profits in the first nine months of Britain’s post-Brexit existence.
Sources close to the company said it had been prepared to disclose the figure during an earnings call with Wall Street analysts on Wednesday, but had not done so because they were not asked to address Brexit’s potential impact on the business.
News of the likely cost underlines the ballooning price of a hard Brexit for the manufacturing sector, which faces being confronted by a toxic cocktail of WTO tariffs, a depreciating currency and the need to stockpile components for assembly activities that take place in the UK.
Ford employs about 13,000 people in the UK, roughly a quarter of its 54,000-strong workforce across Europe.
The full extent of any job losses in Britain and on the Continent is unlikely to be clear until later in the year, executives told analysts on Wednesday.
However, they have already said that the numbers will be measured in thousands rather than hundreds as the venerable car-maker accelerates plans to become what it describes as “the world’s most trusted company, designing smart vehicles for a smart world”.
Ford has already warned of the “disastrous” consequences of leaving the EU without a deal, and is consulting with trade unions about possible job cuts at its Bridgend plant in south Wales.
It also operates another engine plant at Dagenham in Essex, as well as a number of other facilities across the UK.
The car manufacturer said in its full-year results announcement that profits had more than halved in 2018, largely as a result of losses in China and Europe.
One insider said the £800m cost of a hard Brexit in 2019 was consistent with a remark made more than a year ago by Stephen Armstrong, Ford’s European chief, that crashing out of the EU could cost the company roughly $1bn in the first year after the UK’s departure.
However, with a no-deal outcome potentially little more than nine weeks away, predictions of the financial consequences are now being taken more seriously by the Government.
If extrapolated across the car manufacturing sector, a hard Brexit would result in billions of pounds of costs for the industry.
In a statement issued to Sky News on Thursday, a Ford spokesman said: “Our planning assumptions for Brexit include a negotiated exit as the most likely outcome, with a transition period during 2019 and 2020 if the withdrawal package is approved by UK Parliament.
“However, we recognise that the situation is highly uncertain, and are monitoring events closely. In the event of a no deal scenario the resulting border friction, deteriorating economic outlook, coupled with likely further Sterling devaluation, and introduction of WTO tariffs would severely impact Ford’s operations in the UK and across Europe and could potentially result in an $800m headwind in 2019.”
The prognosis is the latest gloom to hit Britain’s car industry, which has seen Jaguar Land Rover outline plans for thousands of job cuts this month, and other manufacturers including BMW and Honda propose temporary shutdowns of British plants.
Ford believes Brexit has already cost it several hundred million pounds because of the pound’s weakness and declining sales in the UK.
Industrial groups have sought to escalate their public hostility towards a no-deal Brexit, with Airbus’s chief executive, Tom Enders, calling the possible outcome “a disgrace” and warning of the likelihood of future investment being diverted elsewhere in a video message on Thursday.
This week alone, Sony has pledged to relocate its European headquarters to the Netherlands, P&O said it would re-register its cross-Channel ferry fleet under the Cypriot flag, and retailers including Pets At Home have outlined multi-million pound stockpiling costs.
Carolyn Fairbairn, director-general of the CBI, has repeatedly warned that a no-deal Brexit would equate to a “national emergency” and urged ministers to avoid it.
The string of corporate warnings has come at a particularly awkward time for ministers because a number of senior Cabinet ministers, including the Chancellor and Business Secretary, are at the World Economic Forum in Davos promoting Britain as an attractive inward investment destination.
Pro-Brexit businessmen such as Tim Martin, who runs the pubs chain JD Wetherspoon, have made the opposing argument that reverting to WTO tariffs will give a post-Brexit UK the freedom to set its own trade policy.