Jaguar, Diageo Warn Employees That Brexit Risks UncertaintyBy and
Jaguar Land Rover says Brexit would be ‘highly damaging’
Diageo says exit would mean renegotiating access to Europe
Leaving the EU would be “highly damaging” and make the U.K.’s biggest carmaker less competitive in Europe, JLR Chief Executive Officer Ralf Speth said in a letter to employees on Monday, provided to Bloomberg News. Remaining in the EU means Diageo benefits from trade agreements the bloc negotiates with other countries, CEO Ivan Menezes wrote in a letter to staff.
In a Brexit, “it would become more difficult to buy components and sell our products in our largest market,” Speth wrote to employees, warning of “increasing and higher tariffs” in Europe. “This is not just an employer’s view or that of ‘big business.’ It is also the conviction of the unions who represent you.”
The luxury-car unit of Tata Motors Ltd. and the world’s biggest distiller join Toyota Motor Corp. and other companies with operations in the U.K. in underlining the risks they face before a vote on Thursday over whether the country should remain in the EU. While the International Monetary Fund has warned the U.K. could slide into a recession if it leaves, manufacturers are concerned such a move would hurt exports and erode their competitiveness.
The effect of a Brexit could ripple beyond the U.K. Earnings for the global car industry are set for a drop of more than 8 billion euros ($9.1 billion) as car sales in the U.K. tumble, depressing production in Western Europe, Arndt Ellinghorst, a London-based analyst with Evercore ISI, said in a note. The U.K. car market, one of the most profitable in Europe, would probably decline by about 14 percent next year, he said. PSA Group, Volkswagen AG and Ford Motor Co. would be hardest hit by the economic downturn.
Ford joined other carmakers including Nissan Motor Co. in writing to employees to warn of the negative impact of leaving the EU. Ford, which employs about 14,000 workers in the U.K., said a Brexit could cost the business “hundreds of millions of dollars every year.” Nissan, which operates a large factory in Sunderland in northern England, said “we prefer stability to a collection of unknowns.” Nissan said it initiated legal action against the Leave campaign to halt its use of the Japanese carmaker’s logo.
A poll taken since the killing of pro-European lawmaker Jo Cox on Thursday and published over the weekend showed 45 percent of voters backed the ‘Remain’ camp, while 42 percent were in favor of a so-called Brexit -- a turnaround from early last week when a slew of surveys put the ‘Leave’ group ahead.
Remaining in the EU gives Diageo access to the single market, and the company benefits from free trade agreements negotiated with other countries, Menezes said.
“The EU has so far concluded, or is negotiating, over 50 of these global agreements, many of which provide significant commercial benefits for Diageo,” Menezes said. “Renegotiating the U.K.’s access to our European countries and beyond would be a huge and uncertain undertaking.”
Meanwhile, Virgin Group Ltd. founder Richard Branson started a nationwide campaign to remain an EU member. He said leaving the alliance would be a backward step for the country that would make doing business harder and increase bureaucracy.
“I have been known for taking risks throughout my career but leaving the European Union is not one of the risks I would want the UK to take -- not as an investor, not as a father and not as a grandfather,” Branson said in a statement.
Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has publicly supported the campaign to keep the U.K. in the EU.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.