Rolls-Royce ready to face the turbulence of Brexit | Business

CWe worry more and more of the effects of a Brexit without agreement on the economy. The pound fell further last week, warned the Bank of England against the threat of recession and manufacturing activity contracted for the third consecutive month.

Rolls-Royce, which publishes its results for the first half on Tuesday, will inevitably face the question of what will be its record if Britain withdraws from the EU on 31 October. Present in nine EU countries, the aerospace business is highly integrated with the single market. It manufactures engines for Airbus aircraft, produced in Toulouse, and has a factory in Dahlewitz, near Berlin, which employs about 10,000 people.

Rolls-Royce has some advantages over other manufacturers in the context of a Brexit without agreement. First, the aerospace industry is already governed by the rules of the World Trade Organization. There will be no additional fees. Second, it operates at a faster pace than the auto industry and does not rely on just-in-time deliveries of parts across the Channel.

Rolls-Royce however warned that Brexit could disrupt its supply chain and prevent it from hiring the most qualified people. To minimize disruption, the company has spent up to £ 100 million on its stockpile stocks at its main Derby and Dahlewitz plant. He also planned to use the giant Airbus Beluga jets to deliver engines manufactured in Derby in France and Germany.

These plans, as thorough as they are, are still based on the fact that companies in the Rolls-Royce supply chain are getting their parts delivered correctly.

Rolls-Royce leader Warren East pleaded for MPs to vote in favor of Theresa May's agreement before the March deadline. More recently, East has been less eloquent, describing Brexit as a problem that needed to be addressed. "I am not sure that we will spend so much money to prepare for a deadline that may never happen," he said in June. "This is only a useless distraction for businesses."

Like many people, East may just get tired of discussing Brexit. Here again, with the government filled with Brexit supporters, he may not see any point in making himself unpopular with the new regime.

East, who has been running Rolls-Royce for four years, has many more things to do to keep him busy, as he seeks to re-establish the company's place as the standard bearer of British engineering. A series of profit warnings and a serious investigation by the Serious Fraud Office had undermined Rolls-Royce's reputation.

East found a heavy bureaucracy unable to react quickly enough to changes in the industry. It has cut 600 senior management positions and is cutting an additional 4,600 jobs out of the company's more than 50,000 employees.

Rolls-Royce had to set aside £ 1.5bn to repair defects in its Trent 1000 engines, whose turbine blades were wearing out too quickly, destroying its customers' planes. East said that orders for the Trent 1000 were up after a bleak month last year.

David Perry, an badyst at JP Morgan Cazenove, says there are challenges ahead as the company has underestimated the cost of developing electric motors in response to the pressure on the sector from emissions.

Last year, Rolls-Royce recorded a loss of £ 803m, excluding financing charges, compared to a profit of £ 1.2bn the previous year, when it had spent £ 790m to repair the losses. For the first six months of 2019, badysts expect underlying pretax income, which excludes the costs of Trent 1000 and other extraordinary items, to rise from £ 81m to £ 95m.