The Effect Of Brexit On Rolls Royce

The Observer tells us that it’s all likely to be very difficult. Without actually managing to understand how the business works in the slightest.

Rolls-Royce has some advantages over other manufacturers under a no-deal Brexit. First, the aerospace industry already operates under World Trade Organisation rules, so there will be no extra tariffs.

Quite, so there’s no downside.

And what’s the thing the Observer doesn’t even know about? Rolls Royce earns in dollars. Which will be worth more when translated into sterling as the pound falls. And Rolls Royce reports in sterling. Thus Brexit will push up Rolls Royce profits. With no downside to be had from changes in tariffs.

Sigh.

15 thoughts on “The Effect Of Brexit On Rolls Royce”

  1. and has a factory in Dahlewitz, near Berlin, that employs about 10,000 people.

    They also have a factory in Indianapolis employing 4,000 people. Strange that this doesn’t get a mention, almost as if that would raise questions about the nonsense statement the “business is highly integrated in the single market”.

  2. Bloke in North Dorset

    Is the aerospace side of RR a manufacturer or a service company?

    It makes engines built makes most of its money leasing and servicing them. It has a massive operations centre monitoring those engines 24/7 and arranges maintenance when needed as soon as they land.

  3. its main business is selling flying time. to airlines operating around the globe. with facilities around the globe.

  4. They also have a factory in Indianapolis employing 4,000 people. Strange that this doesn’t get a mention, almost as if that would raise questions about the nonsense statement the “business is highly integrated in the single market”.

    See also Boeing announcing its first European factory in 2017 and opening it last year. In Yorkshire. Making parts that will be shipped to the US for assembly on, one assumes, the just-in-time basis that any customs checks apparently render unfeasible.

  5. The article is tosh. Rolls Royce aero engines remain saleable in the world market because the company transferred its regulatory compliance functions to mainland EU under EASA – the EU standards organisation. So did some 600 other aviation-related British companies.

    The British Civil Aviation Authority ( which carried out its functions as part of the EASA system) stated it would take 5 to 10 years to bring its operation up to the required scale and detail to match the EASA system.

    Many other British industries have had to do the same thing to ensure the continued international acceptability of their products.

    Two years ago a friend of mine spent several months studying this in association with the British Standards Institution and wrote a very sensible paper. He took this to a well-known advocate of “WTO rules” who did not bother to read it but simply said “ It will be all right on the night”. I think that many smaller, less clued-up firms will find it isn’t.

  6. The Observer has always been lefty but it used to be the only lefty paper that was any good. Mind you, how many papers are any good anyway?

    I suspect that the only one that achieves roughly what it sets out to achieve is the Daily Mail. Though I gather that its new editor will soon put a stop to that.

  7. The EASA, that was the old JAA, has a number of non-EU members already so seems reasonable that why the CAA couldn’t continue as members after Brexit unless the EU want to be awkward about things.
    They have said Brexit will change the relationship whatever that means, my guess is that it’s an area where we punch above our weight.

  8. BiND,

    I keep beating this drum whenever anyone talks about “manufacturing jobs”.

    Lots of manufacturing companies in the UK are closer to service companies. Parking meter companies make them, sure. But they also plan where they go, make special modifications, build the server software, train people and do support.

    Same with F1 teams. My mate used to bash metal bits. Now, he designs bits in CAD software and a machine makes them.

  9. Bloke in North Dorset

    BoM4,
    It started in the 80s with nationalisation. Big song and dance that we were losing “manufacturing jobs” when the tea lady lost her job and the antenna was closed or outsourced.

    The real gnashing of teeth was when IT was outsourced, huge loss of manufacturing jobs blamed on the Tories. There were articles explaining what had happened, but hey, evil Fatcher.

  10. @ BiND
    There was a reduction in the numbers employed post-denationalisation because the nationalised industries had far more people than jobs. I attended a meeting where the Chairman of “National Power”, the largest successor company to CEGB, explained why they were making one-third of the unionised workforce redundant – because they had three people for every two jobs.
    Of course the unions hated Mrs Thatcher.
    The rise in unemployment was actually less than the non-workers shed by the denationalised industries.

  11. @Noel C

    Yep. RR also have a factory in Singapore and…. and … and … same as BAE

    BAE USA Big Guns

    Remoaners & Left seem to believe we have no trade outside EU and ignore ~90% of UK trade is internal.

    F1 Spoiler Alert

    .

    .
    Re: F1: Hungary – 1st & 2nd Brit based teams

  12. All of the F1 teams bar 3 are Brit based (Ferrari and Toro Rosso in Italy, Sauber/Alfa Romeo in Switzerland)

  13. @Chris Miller

    Yep. Also Indycar/CART, Formula E, Rally Cars, Bikes, Bicycles etc iiirc Penske has a factory in Poole

    UK Exports are dominated by non-consumer goods & services, thus “invisible/ignored” to Pols/MSM & bloke in street – Pols/MSM should be promoting these positives instead of negative doom & gloom.

    eg Sunseeker and Princess Yachts each employ ~3,000 hi-skilled staff

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