View from the German-British Chamber of Industry & Commerce on the Brexit situation

 

 

Brexit Analysis

The German-British business community hopes for a soft Brexit, but majority expects a hard Brexit

[21 December 2016]

A majority of companies of the German-British business community (56%) believe that in the medium term Brexit will be negative for their business, according to a survey by the German-British Chamber of Industry & Commerce. Only 11% think that a Brexit will be positive for their business, with the remainder saying either that the effect would be neither positive nor negative (12%) or that they do not know (21%). Among those saying the impact would be negative, more think the impact would be "very" rather than "fairly" negative (32% and 24%, respectively). 

According to Dr Ulrich Hoppe, Director General of the Chamber, these results show, “that substantial uncertainty continues to be felt in the business community, even if the sentiment towards a Brexit is not as negative as it was before the referendum.”

Respondents were asked follow-up questions about the impact of a soft or a hard Brexit on their likely future investment in the UK. 38% said in case of a soft Brexit the effect would be fairly positive or very positive and only 14% said the effects would be fairly negative to very negative. For nearly half the companies the effect would neither be positive nor negative (40%) or they were unsure either way (8%). The picture changed completely when asked about the consequences of a hard Brexit. For more than two thirds of companies this would have a fairly negative (31%) or very negative effect (37%). Only a handful of companies (3%) viewed the effects of a hard Brexit as fairly positive or very positive for their future investment in the UK. For 17% there was neither a positive nor a negative effect and 12% were unsure either way.

Respondents identified a few key issues for the upcoming negotiations, most importantly a smooth transition period to ensure stability on the currency markets (80%). This is followed by the desire to continue to be able to easily employ workers from the European Union (66%) and continued access to the single market (64%). Common standards on trademarks and patents are also important for 40% of the respondents. A sector-specific analysis shows that passporting rights are extremely crucial for financial services, and access to European research funding and a common framework for pharmaceuticals and medicines is hugely important for that particular industry.

The Chair of the Council of the Chamber and Partner at law firm Nabarro LLP, Patricia Godfrey, commented: "The relationship between Germany and the UK is central to a successful Brexit negotiation. The findings show that the German-British business community favours a soft Brexit and a smooth transitional period. Any hard Brexit will be a major blow to their confidence with 68% saying it would have a negative impact on their business. We hope politicians on both sides take note of our findings."

The German-British Chamber of Industry & Commerce conducted 195 online interviews with its members and German subsidiary companies in the UK. Fieldwork was conducted between 30 November and 7 December 2016.

Survey Graphics

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Further Information 

Brexit four weeks on – where do we stand? What will the future bring?

20 July 2016 - London

Theresa May as the new Prime Minister provides some stability in these still uncertain times.  Giving key Brexiteers prominent positions in her new cabinet raised some eyebrows, but on reflection this can be seen as a clever tactical move to unify the country and her party.  By allocating responsibility where it belongs she has created room for manoeuvre for herself.

One thing is certain, the administrative burden on businesses will increase once negotiations are concluded. The Chamber will work with you, our member companies, to provide the support and advice necessary to minimise the economic impact. It is too early to make reliable predictions on the type and amount of extra bureaucracy (passporting for financial services, country of origin rules for globally operating companies, product safety and mutual recognition of professional qualifications are just a few areas that are expected to see changes).  

The return to some political stability in the UK will enable the development of sensible approaches to redefining the relationship with Europe over the summer. The UK as well as the whole of the EU have a huge interest in the single market staying together and not shrinking in size.

What are the options - hard Brexit under WTO rules or soft Brexit with some form of continued access to the single market? 

Our hopes are that it will end in a soft Brexit giving unhindered access to British companies to the European market and vice versa - will such a result be possible? We strongly believe so, that is if an effort is made by all parties concerned.  To achieve this outcome, compromises will be necessary on both sides.  Britain will have to accept some form of free movement of EU workers and the EU will have to accept certain restrictions on at least a temporary basis. In this context, it should not be forgotten that the UK was one of the few countries to immediately open her borders to workers from Eastern European accession countries in 2004, whilst the vast majority of other member states invoked restrictions for seven years.  Given the current level of immigration in the UK, it could be argued that it would now only be fair to offer Britain some temporary restrictions on future immigration from the EU. Whether this is a way forward, remains to be seen, but what is certain is that both sides will have to give on that front.  Once the dust has settled, we are confident that European leaders and the new UK government will work towards finding sensible and practicable solutions.

For Britain to succeed economically in future, she will have to remain a country open for talent, otherwise companies will be unable to prosper here and be forced to go elsewhere. The EU needs to urgently overcome its structural problems to avoid some companies leaving Europe altogether and moving to the United States, often perceived as a more promising market, especially in high-tech industries. This in turn would weaken the prospects of all European economies which cannot be in our interests.

To stay open for talent and businesses is a message the new political leadership in the UK will have to take on board and actively sell it to the electorate.  This will not be an easy task, but showing true leadership is never easy, as we, from the international business community, know well.  In other words, the road ahead will be bumpy, but we are confident that in the end common sense will prevail on all sides.

Destination unknown – United Kingdom faces an uncertain journey

24 June 2016 - London

The EU Referendum result, which gave the Leave campaign a majority of 52%, has been received with dismay by many in the business community, as it is now completely uncertain how the framework for economic cooperation between the UK and the EU will develop.

Prime Minister David Cameron announced that he would step down, to take effect by October this year, and only his successor will be entrusted to start the formal leave negotiations. Whether the Prime Minister will last that long remains to be seen, but he has given the country time to reflect and his party a chance to unite, so that a constructive approach towards redefining the British relationship with its European partners can be developed.

Nevertheless, it is paramount to keep level-headed and cooperate with each other, in order to keep the economic and political effects on the United Kingdom and the European Union under control. After all, be they inside or outside the EU, when it comes to most economic and political issues, all Europeans continue to be in the same boat.

Dr Ulrich Hoppe, Director General of the German-British Chamber of Industry & Commerce, stressed that for companies involved in European trade nothing will change in the short-term because the regulatory framework will remain the same until Britain has concluded the formal negotiations to leave the EU.

In the upcoming transition period and beyond, the German-British Chamber of Industry & Commerce will continue to support British and German companies to successfully do business with each other and we are confident that future commercial opportunities will continue to arise for businesses from both countries.

Dr Ulrich Hoppe

Director General of the German-British Chamber of Industry & Commerce