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Airbus threatens to 'reconsider' UK investments in no-deal Brexit

Departure without transition agreement will lead to 'disruption and interruption of UK production'

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Airbus offers high-quality jobs across Britain and supports a massive supply chain with its wing-making operation.

London

AIRBUS threatened to pull its UK investments if Britain walks away from the European Union without a deal, upping the stakes for Prime Minister Theresa May as she fights to deliver a Brexit that won't wreck the country's economy.

In the starkest warning yet from any major company, the aerospace giant said on Thursday that a departure from the single market and customs union without a transition agreement would lead to "severe disruption and interruption of UK production". Airbus, based in Toulouse, France, would be forced to "reconsider its investments in the UK, and its long-term footprint in the country".

"This is a dawning reality for Airbus," said Tom Williams, chief operating officer of Airbus Commercial Aircraft. "Put simply, a No Deal scenario directly threatens Airbus' future in the UK."

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The remarks further hem in Mrs May, whose proposals aimed at keeping trade as easy as possible after the divorce has been repeatedly knocked back. The EU is stepping up its rhetoric about the likelihood of a chaotic divorce and is warning companies that they need to prepare for the worst. Anti-Brexit lawmakers have seized on the announcement as more evidence that the government's approach to the split is harming the economy.

"We have made significant progress towards agreeing a deep and special partnership with the EU to ensure trade remains as free and frictionless as possible, including in the aerospace sector, and we're confident of getting a good deal that is mutually beneficial," said a government spokesman.

For the first time in two years, it's the EU side rather than the UK that's making most noise about the chances of a messy walk-out. The warning from Airbus - a company that offers high-quality jobs across Britain and supports a massive supply chain with its wing-making operation - comes Mrs as May continues to fight with her own government about the kind of Brexit deal she will seek. Britain leaves the bloc in March next year.

Companies have been warning they need clarity and urging the government to take decisions. But this announcement is the strongest yet and goes beyond the usual platitudes.

Mrs May heads to Brussels later this month for a summit that was meant to be a defining moment in the negotiations and the last gathering of leaders before the divorce deal is signed off in October. Instead, a lack of progress and the chances of a breakdown will be the main point of discussion.

EU leaders will also remind Britain at the summit that if a Brexit deal isn't struck, there will be no transition - the grace period that businesses are counting on for the first 21 months after the split.

Even if Mrs May does secure the planned transition, it's "too short" for Airbus to make "required changes with its extensive supply chain", the company said, adding that it would carefully monitor any new investments in the UK and refrain from extending its British supplier base.

Other companies are also starting to move, with car manufacturing one of the crucial industries at risk. Jaguar Land Rover is moving production of its Land Rover Discovery SUV from its historic Solihull facility to Slovakia by early next year and will lay off workers.

Unilever dealt London a significant blow in March when it said it picked the Netherlands as its main headquarters. The maker of quintessentially British brands like Marmite spread and Lipton tea had maintained a dual nationality for more than a century.

This month, it said the decision makes it unlikely to remain in the benchmark FTSE 100 stock index - another setback to Mrs May's vision for a UK as an attractive investment destination.

As well as employing 14,000 people at 25 sites in Britain, Airbus has more than 4,000 UK suppliers and supports more than 100,000 jobs in its British supply chain. The manufacturer has repeatedly warned about a risk of Brexit sidelining the UK when it comes to future aerospace projects. Its German operation is working with French warplane specialist Dassault Aviation on a next generation of European fighter aircraft, rather than selecting its historic partner in combat jets, London-based BAE Systems.

Even with existing manufacturing operations, there are concerns. Airbus has held talks with suppliers about measures to safeguard production, including the stockpiling of components, to help sustain deliveries in the event of a transition-less Brexit leading to border delays.

"We've become increasingly frustrated with the lack of clarity and obviously time is running out, it's coming up to less than nine months to go," said Mr Williams. "We have come to the point where we have to make serious decisions and quite often those decisions are long term in nature, and without clarity it's too dangerous for us to proceed."

Airbus CEO Tom Enders pledged in February that Airbus would retain its British operations "long into the future'' in what seemed then to be a turnaround from previous attacks on the planned divorce. He said the company would continue to see the UK as a "home country and a competitive place to invest".

Since that communication, the possibility of a no-deal Brexit appears to have increased, with European Commission President Jean-Claude Juncker saying that the two sides remain far apart on the "hardest issues" and that he is stepping up preparations for a breakdown in talks. BLOOMBERG

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