Honda operates two large warehouses near Swindon on an old Spitfire site in the south – west of England. This is Honda’s global production centre for 5 door Civics and its only car factory in Europe. The plant aims to keep the Civic production maintained for a maximum of 36 hours therefore stock moves in and out quickly to maintain a fast pace production line. Currently, the company operates on a ‘just in time’ process whereby 2m components circulate into the factory line each day. With orders arriving within 75 minutes to 24 hours, no time is wasted before products are sent to assembly lines.
As a result of Brexit, Honda fears that border checks will lead to the build-up of stock so high, the warehouses will not be able to cope. The waiting game leading up to Britain’s exit from the EU comes with confusion and uncertainty for Honda. This disconcerting fact faces other manufactures such as BMW and Nissan. Jacob Rees – Mogg, the pro-Brexit Conservative MP, says: “The real issue is whether the UK remains an efficient base to manufacture-cost competitive and value for money for customers.”
In addition, based on trading with the US Honda estimates UK export clearance, usually a 5 to 24 hour order to destination journey within the EU, will take an additional 24 hours on top of this. The main delays are likely to come from the transition from land to sea. 75% of Honda components are currently transported through the Eurotunnel, however with the 60,000 estimated number of extra customs declarations needed in the event of a hard Brexit, the volume of deliveries will cause a bottleneck and major delays that the channel tunnel will struggle to recover quickly from. Therefore Honda’s prediction is that sea routes may have to be used with larger deliveries arriving more irregularly and adding 3 to 6 days onto arrivals. This again would put strain on UK ports and the production of UK plants needs to be seriously evaluated over the coming months. HM Revenue and customs says the increased number of customs declarations, requiring a new IT system and additional staff would cost Honda £2.1m a year in form filling alone putting additional strain on Honda.
Other manufactures will also be hindered by increased customs checks. After speaking to its network of 1,600 suppliers in Europe that sell to the UK plants, BMW found only half were prepared for customs checks. Problems also stemmed from its UK suppliers. Only a third had customs procedures in place whilst others were paying exceptionally high charges per load. As a result, those suppliers not prepared for Brexit need to be taught the basics of customs – resulting in more time and resources being used.
Mr Rees – Mogg however believes the use of sea travel is nothing to be concerned about: “Just look at what goes through Southampton regularly. Most goods are cleared within seconds, only 6 per cent of good take more than a minute to clear.” He believes that through leaving the bureaucracy of the EU, importation can become a more streamlined process. The plans for the next civic model will be reviewed by Honda in 2021. The potential to source more products from within the UK would be advantageous as a result of Brexit however this is a plan that would take years to implement.
Mr Ian Howells, senior vice president of Honda states: “With Brexit we just can’t react. We can scenario, we can contingently plan, but we can’t then react because we don’t know.”