News Views

Brexit will cost BASF €10s millions a year

Richard Carter, CEO of BASF UK and Ireland

This article was published in on 19 February 2018.
The original article is here:

The upcoming Brexit causes unrest on the executive boards of companies, and international corporations like BASF are also changing the subject. The German chemical giant has been doing business on the island since 1880, and now has 10 factories and thousands of employees, who among other things produce paints, fertilizers and pesticides. Their boss, the Briton Richard Carter, is harshly criticising the actions of the UK government.

Mr Carter, how much does the upcoming Brexit make you nervous? 
19 months after the referendum there is still uncertainty about where we will eventually arrive. We are ready to make changes if we know what is needed. But the lack of certainty limits us to what we can do on a practical level now.

So how do you prepare for Brexit? What is your so-called emergency plan? 
We look at tariffs and barriers to trade, talk with customs experts and our customers about the possible consequences. We’ve formed teams with members from the, Brussels and our headquarters in Germany, which deal with five different topics, most notably the impact on trade and regulation. For example, it would be important for us to know if the EU regulatory requirements under REACH are still valid for us.

How likely do you consider the option of “hard Brexit”? 
Although the UK and the EU have now started the second phase of negotiations, this seems the most likely option right now. It is regrettable – but the companies simply have no planning certainty at the moment. 

How do you rate the position of the UK Government? 
We would like to see the UK Government clearly positioned, clearly demonstrating what it wants and what it will do if it does not achieve that. We are in close contact with the government, but we can not make the necessary arrangements for the day-to-day business unless the basic parameters are clear.

Have you calculated what the costs of a Brexit for BASF are? 
We expect 40 to 60 million euros in extra costs per year – only through possible tariffs and tariffs, their conversion and delays in the supply chain.

Do you have advantages as a daughter of a German company? 
Brexit is not just a problem for the British. A tough break with the EU will affect imports to Britain more than exports from the UK. Trade goes both ways. And the supply chains are now so complex that goods sometimes even cross the borders several times.

What would be the highest priority for BASF at Brexit? 
Of course, we would like to change as little as possible. It is important for us that trade with the EU continues to run smoothly and that there will be no diverging regulatory requirements.

As a chemical company, BASF is involved in the supply chains of many companies in other industries …
Absolutely. We supply the aerospace, automotive and agricultural industries – just to name a few examples. Some of our employees are even involved in the production process directly on site. For example, we have a team of people responsible for paints at car maker Nissan in Sunderland. That’s why the Brexit is so complex. The boundaries between the sectors are blurred.

There is currently talk of a transitional phase. What do you make of it? Is it useful? 
In any case. We think that the “about two years” that the British government is talking about are rather short. We would prefer up to five years. The time is running out. We need certainty.

However, the future relationship between Britain and the EU will not be discussed until October. 
That’s just six months before Brexit! From a political point of view, that may be a lot of time, but it’s too short for companies. Some companies will already implement their contingency plans by then. The Brexit has an incredible amount of impact to prepare for, and that takes time.

Can you give examples of that? 
Introducing customs duties could have a significant impact on supply chains, for example, if goods are no longer efficiently handled at Dover port and there are congestion and delays. The same applies of course to the ports on the other side of the canal, in Calais or Antwerp. And from the transportation industry, it is likely that there will probably be a shortage of truck drivers in the UK soon. Many of them came from other EU countries – which now offer them better opportunities.

BASF currently generates three to four per cent of group sales in the UK market, with 10 production sites and 1,400 employees. Where do you stand in five years? 
I can not give you an answer to that. That is the answer. And it says a lot when an entrepreneur can not tell you how his business will look in five years. The uncertainty is just too big. We hope that will change in the coming weeks.

Will the British market lose importance as a result of Brexit? 
At BASF we have to remain competitive, not only in the industry, but also within the Group. If we decide on investments internally, the plant must meet certain conditions – and that could include access to the European single market. The connection to the EU is important for multinational corporate investors like us. But wherever Brexit will lead, the UK market is important to us, and we will continue to explore new opportunities. But we hope that Britain will clarify its intentions.

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