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Bentley cars go through final quality control as they come off the production line at a factory in Crewe, U.K., on Jan. 22, 2019.

Phil Noble/Reuters

Failure to strike a Brexit trade deal with the EU would be “extremely damaging” and cut profits by up to a quarter at carmaker Bentley, its boss told Reuters, as the government urges firms to plan for potential disruption.

Britain said on Monday there was still no basis for talks with Brussels to resume, just over two months before free and unfettered trade is due to end, leading to possible tariffs, customs checks and long delays for imports and exports.

The Volkswagen-owned luxury brand has spent millions to prepare, including stockpiling, switching ports and a provisional air freight contract, but warned on failure to find an agreement.

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“It would be extremely damaging,” Chief Executive Adrian Hallmark told Reuters on Tuesday.

“If you took the duties on components, 45 per cent of the bits we buy in, and the 10 per cent tariff on cars, worst-case scenario, it would take out a significant percentage of our profits,” he said. “(It) would probably cost us 20 per cent to 25 per cent.”

After a 288 million euro (263 million pound) operating loss in 2018, the firm returned to the black in 2019 with a 65 million euro profit following a turnaround plan with record sales of 11,006 vehicles.

Disruption between Britain, the world’s sixth-biggest economy, and the EU, the largest trading bloc, would come on top of the hit caused by COVID-19, which prompted Bentley to stop production between mid-March and early May.

Output has neared full capacity since mid-September, as distancing measures in the factory are enforced, and the firm has seen a strong bounceback in major markets such as China.

“In August, September, October, we’ve been running at about 20-25 per cent above the pre-crisis planned level of orders ... in China,” said Hallmark.

There have been smaller increases in Europe and the U.S. and flat levels in Britain, South Asia and the Middle East.

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“They didn’t close China down,” he said. “The coronavirus didn’t suppress economic activity anywhere near as much as we put the brakes on and the fundamentals have been strong.”

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