JLR Could Lose 1 Billion In Brexit Wake

It's official - the “Brexit” referendum has passed in Britain and the country is now poised to leave European Union. An unnamed Jaguar Land Rover spokesperson had indicated prior that, if Britain does leave the EU, the automaker stands to potentially lose over a billion pounds in profits by the end of this decade.

JLR is Britain's biggest carmaker. According to the source, internal documents produced by JLR chief economist David Rea estimate that s the firm’s annual profit could, in the worst of several scenarios, decline by 1 billion pounds ($1.47 billion) by the end of the decade if Britain leaves the European Union.

JLR has already responded to the current uncertainty about the near future, and CEO Ralf Speth has spoken outwardly against leaving the EU. Early moves include talk of opening a European office, delaying commencement of work on its new plant in Slovakia that was announced in December, and delaying negotiations to lease property at Silverstone race track.

The estimate of a 1-billion pound decline in pre-tax profit by 2020 is based World Trade Organization rules for trade with Europe, that could potentially apply if Britain returned to full economic independence. Those rules would mean a 10 percent tariff on exports, and an import tariff of roughly 4 percent on components, that would most likely apply if Britain leaves the EU.

The European market is a big one for JLR, that accounts for close to a quarter of its 520,000 total sales last year

Officially, Land Rover has remained mum on what, if any efforts it will undertake, to combat losses precipitated by the “Brexit” exit.

"As part of our standard business planning process, we regularly look at macro-economic and geo-political developments around the world," a JLR spokesman said in an emailed statement.

"Like any other responsible global business, we have analyzed the impact of any potential UK departure from the EU. However, we are not discussing details of any internal business analysis."

Many other carmakers have come out against Brexit. Ford, which has an engine manufacturing operation in Britain, said it could face additional tariffs on both exports and imports.

Those in favor of leaving the EU argue that Britain should be able to negotiate free trade with EU members France and Germany, because French and German models are popular in Britain as well.

The JLR documents contain several other scenarios in which negotiations with other markets lead to lower losses in the hundreds of millions.

Any slow down of JLR’s rapid growth and momentum would be a blow Britain’s resurgent automotive industry, which, absent of Brexit, is currently on track reach a record production level of 2 million cars by 2020.

According to sources, Speth issued an internal statement to employees this week, that included a warning of the potential consequences of Brexit.

"It is inevitable that we would face increasing and higher tariffs, making our products less competitive in Europe."