Director's Letter

In terms of German-British business relations, the past year was a reasonably good one: despite an overall weak global trading environment, the trade in goods between our two countries grew significantly and now stands at GBP 108 bn per annum. After dropping out of Germany’s top ten trading partners in 2022, the UK is now back on the list, edging into ninth place. Looking at the trading relationship from a British perspective, Germany is the UK’s second most important partner after the United States. Of course, Brexit has produced a substantial dent in the trade figures, but we can now observe that bilateral activity and trade are growing again, thus potentially closing the gap over time. However, to continue closing this gap, we will need to see a closer EU-UK alignment in a number of key areas such as creating a framework for the trade of phytosanitary products and simpler/easier rules for the short-term posting of workers across the Channel. Despite these positive news, trade will only be able to develop significantly below its potential if such measures remain unimplemented.

With weak growth predicted in the UK and in Germany in 2024, an increase in trade between our like-minded nations would stimulate both economies to help them embark on to a positive trajectory. Therefore, we at the Chamber will continue increasing our efforts to support companies doing business across the Channel, as this is not only good for them, but also for our economies as a whole.

First of all, I would like to wish everyone in the German-British business community a belated Happy New Year and all the best for 2024. Economically and politically, this year is going to be an uncertain one for us all. Not only will the UK have a new government by the end of it, but more importantly the US too. Geopolitically and globally, the US election is the truly important one and it will, whatever the outcome, remind us in Europe that we must finally get our act together and take more responsibility for our own political and economic prosperity. Whilst the speed at which we will have to transform depends on the election’s outcome, it is abundantly clear that we have to step up our game. Therefore, any future UK, German or any other European government alike should prioritise addressing weak economic growth, burdensome bureaucracy, climate change and most importantly the long-standing underinvestment in defence capabilities. Successfully addressing these challenges will in the long run not only create a more secure Europe, but also a more prosperous one. 

Business communities are up for the tasks ahead, but need the freedom and a reliable framework to play their part and act decisively. Providing the network infrastructure for the desired growth of renewable energy production, driving efficiency in defence procurement and creating the right framework for the IT sector to develop new and innovative applications, are just a few areas that need urgent attention. The major economies in Europe need to be drivers on these fronts and I hope that the next UK government, whatever its composition, will also take more of a leadership role in these areas. The last few years have shown that the provision of decisive action has, for various reasons, been in short supply not only in Britain, but across Europe as a whole.

In 2024, the Chamber in its interactions with the wider political establishment across the UK and Germany will focus on the need for closer cooperation and shared approaches to common challenges. One particular area, which needs addressing is further improving business and general shorter term mobility across the Channel. Working together creates foundations for new relationships, which are the basis for successful cooperation, be that in business, politics or on a personal level. Therefore, our businesses would welcome the EU and the UK to use the upcoming review of the Trade and Cooperation Agreement in 2026 as an opportunity to make significant progress on this front. With the devil lying in the detail, preparations for that have to start now.

…is peace, stability and growth, but these are likely to be in short supply, especially in light of the war in Ukraine, the conflict in the Middle East and the various other military confrontations around the globe, which will not abate any time soon. The same is true for stability: with so many elections looming in 2024, from the US and India to Europe, the probability of a further rise in populism is substantial. Growth is another problematic issue, especially in Europe where not only Britain and Germany will experience a lacklustre performance of their economies. This lack of growth will severely reduce the financial room to address the manifold challenges, be that of investing significantly more in defence, combating climate change or addressing global imbalances, which create migratory pressures.

As the world continues to face ever more challenges, it is increasingly important to cooperate closely on an international, as well as on a bilateral level. Therefore, the rapprochement in the relationship between the EU and the UK that we have seen in 2023 will have hopefully laid the foundation for further improvement in 2024. The recent proposal by the European Commission to postpone the introduction of customs duties on electric vehicles traded across the Channel for three years is a positive step in this direction. We would like to see more of these proposals, as they allow businesses to trade and operate more freely in the long term. For this reason, the Chamber has numerous ongoing discussions with the political establishments on both sides of the Channel to make the case for more openness, as this is a precondition for economic growth and prosperity without which we will not be able to address the challenges mentioned above. Therefore, we are exceedingly grateful for the support of our 800 members, which give us a voice to promote our common cause.

In closing, I would like to wish everyone a Happy Christmas and a prosperous 2024. The Chamber is here to support you to capitalise on future business opportunities in our two countries and beyond!

According to our recent Autumn Survey, the outlook for the development of the UK economy continues to be a very cautious one. However, members of our community remain optimistic about their own activities, with 40% of respondents planning to increase their investments and a similar number expecting to employ more staff. It was interesting to note that even if the main reason for investing in the UK is the importance of the British market (50% plan to invest in sales and marketing activities), her appeal as a manufacturing location should not be underestimated, as approximately 30% of respondents are planning to invest in production and manufacturing facilities. This result is in line with recent findings reported in the Economist that the British manufacturing sector has been doing reasonably well over the past years.

Currently, political uncertainty and the lack of demand (because of a relatively weak economy) feature most prominently as challenges for our businesses. These are followed by trade barriers, shortage of skills and labour costs. In comparison to six months ago, energy costs have moved down the agenda from third to sixth position.

The Windsor Framework and the resulting improvement in the relationship between the EU and the UK is viewed more positively than six months ago. Now 42% (versus 29% in spring) expect this to have a measurable positive impact on their business activities.

These relatively positive findings make us hopeful that, despite the manifold global crises, British-German business relations will continue their upward trajectory in the months and years to come.

The Prime Minister’s recent announcement to change the UK’s approach to meeting Net Zero has received criticism from various sides. Not only from climate activists, but also from industry, which needs certainty about future regulatory frameworks, so that it can confidently make the necessary investments to support the energy transition. Whatever the merits of the new British approach are, what has again become clear, is that governments need to not only improve their levels of communication, but also be more consistent in their approaches when planning for the future. Combating climate change is costly and to get and keep everyone on board is vital, especially when the going gets expensive. The German government also had to learn this lesson over summer when it ran into difficulties with its heating bill.

In any case, some elements of the revised British approach have brought the UK more in line with the EU: the UK’s target of ending the sale of combustion engines is now in line with the EU’s (some exceptions will still apply there, but may not play an important role). Of course, it would have made economic sense to have aligned these dates initially. Another area where EU-UK alignment will be crucial is the issue of the future Carbon Border Adjustment Mechanisms, which should be linked up to help them operate as efficiently and effectively as possible.

We hope that with the current improvement in the political relationship between the EU and the UK, both sides will enhance the coordination of their strategies for the benefit of everyone.

It was welcome news that the Department of Business and Trade announced on 1 August that the CE mark will be valid indefinitely for many products in the UK. The exact details have not been published yet, but this move will make trade across the Channel much easier for many companies. This is especially important as both our economies need a boost and trade plays an important role in facilitating growth. In any case, it is interesting to note that to some extent the UK has now become a rule taker. A number of commentators have argued for many years that the EU is a regulatory superpower and therefore it often makes economic sense for third countries to align to its rules and standards. It may be suggested that only a Brexit-supporting government could bring about this pragmatic unilateral alignment, as a more pro-European government would have been hammered by hardline Brexiteers.

Let us hope that this sense of pragmatism is extended to some of the UK’s immigration rules in the near future. The planned increase in visa costs and the rise in the NHS surcharge will make the import of skilled labour more expensive and thus might make closing the UK productivity gap more difficult. However, this may well be a shorter term political/economic trade-off the British government is willing to accept. Leaving aside the longer-term immigration policies, more short-term flexibility is needed on all sides (the UK, the EU and its member states), for example, in allowing the cross-border flow of workers on temporary assignments, as well as for intern and student exchanges. A more flexible approach in these areas would help to keep our European economies and societies strongly intertwined, an imperative in this day and age.

The Chamber will closely monitor these developments in the months to come and will continue make its voice heard, so that bilateral trade and investment can grow stronger again.

The recent announcement by Tata about building a gigafactory in Sommerset instead of Spain is welcome news for the UK as a location for the automotive industry, but in the form of direct and indirect subsidies, it has come at a heavy cost to the British taxpayer. Some estimate the costs to be up to GBP 1 billion, potentially representing 25% of the total investment. Of course, the electrification of transport is a key element of the policy mix to combat carbon emissions and their effect on climate change; however, this support was also part of the UK government’s efforts to demonstrate that the UK is an attractive location for industry and to reduce global supply chain dependencies. In other words, a number of political and economic aims were pursued and support can now be more easily justified by citing one of these three reasons, whether in isolation or in concurrence. The UK is not alone in strongly supporting inward investment in certain industries; Germany is expected to pay an even higher share of public subsidies (around Euro 10 billion out of the Euro 30 billion investment) for Intel´s new chip factory in Magdeburg, even if this investment is only important for two of the main policy goals of our time, i.e. security of supply and supporting future industries.

From these examples we can see that like-minded governments in the developed world are now not only spending vast amounts of public money to attract investment, but are often also competing with each other in doing so. The question remains whether the huge financial support granted is always the most efficient allocation of resources to address the policy challenges at hand. Shouldn´t we all be working more closely together, not just by championing a limited number of technologies (often to be applied and produced in advanced economies) to combat climate change, but also by supporting projects around the world, which offer the highest net return in terms of the reduction of carbon emissions? Furthermore, if we want to remain industrial and technological powerhouses might it not be more beneficial to invest much more in developing technical skills and research and development? If the security of supply is important, shouldn’t a stronger focus be on diversifying supply of input/raw materials? These questions suggest that we in Europe (Germany and Britain as traditionally open and market-driven economies can take a lead with others) should focus less on outcompeting each other (of course, a bit of policy competition is always good) and work together closely – also with the US – to pursue policies, which most efficiently address the manifold global challenges we face.

Last weekend’s events in Russia offered a stark reminder about how extremely volatile the world has become. Therefore, it is important to have close ties amongst likeminded nations in Europe and beyond, so that we can react quickly and appropriately to new developments. Britain and Germany have always been close partners and thus it is good to see that bilateral trade is recovering from Covid and Brexit. The current prognosis also shows that the UK economy will be returning to growth in 2023. These welcome news may even act as a prompt for Germany to think harder about how to reinvigorate its economy as current projections are expecting a decline in its GDP for 2023.

Setting the right conditions for growth is an important task for any government. Therefore, when designing regulatory frameworks, Britain’s envisaged results-oriented approach to future industries like pharmaceuticals, information technology and especially AI is something to look at it. This is important as the British approach may yet prove to be more successful in helping to reap fully the benefits of emerging technologies. The European Union runs the danger of being too prescriptive and risk-averse, thereby foregoing the opportunities for wealth creation and prosperity. These opportunities must be seized upon to better enable us to master the challenges (financial and otherwise) of the war in Europe, demographical and climate change (just to name a few) in the years to come.

In light of the conclusion of the Windsor Framework, we at the Chamber hope that the improved relationship between the EU and the UK will lead to honest and open discussions on how best to learn from each other. (This week’s signing of the EU-UK memorandum on financial services cooperation is a step in this direction.) Only in this way, will Europe overall become more dynamic and thus be able to live up to its responsibility in the world.

The Retained EU Law (Revocation and Reform) Bill was recently shot into the long grass, which was welcomed by many in the business community. The accompanying regulatory uncertainty that may have ensued, had it been implemented as planned, would have had huge repercussions for economic activity and investment in the UK. (In essence, the bill envisaged to replace EU laws, which were incorporated into British law after Brexit and in the case that no replacement for the existing laws and regulations was established by the end of 2023, these would have ceased to apply.)

However, another issue has recently come to the fore: the announcement from the carmaker Stellantis claimed that if the Brexit deal (i.e. the provisions of the TCA) is not renegotiated, the UK loses its attractiveness as a location to produce electric vehicles (EVs). This is because the current rules of origin provisions will become more stringent over the coming years and as a result, customs tariffs will apply, making it more expensive to export EVs across the Channel. Due to the UK being a significantly smaller market than the EU, this will affect Britain more than its European counterparts. Whether the rules of origin requirements of the TCA for trade in EVs will be renegotiated in time remains to be seen. If not, substantial subsidies will need to be paid to attract EV production to the UK (as can be seen from the very recent JLR example).

What these examples clearly demonstrate is that we (the EU and Britain) need to cooperate more closely to seize opportunities together, especially as the UK and the EU continue to be – and not only in economic terms – heavily intertwined and dependent on each other. In other words, despite the mood music having improved since the agreement on the Windsor Framework, it is high time to implement concrete measures to foster trade and economic cooperation, particularly because growth in the UK and major EU economies urgently needs a significant boost.

According to our recent Spring Survey, nearly half of the surveyed companies expect their UK operations to perform better or significantly better over the coming twelve months, with only one tenth taking a negative view, and the rest expecting a stable development. This suggests that overall the German-British business community is managing the current challenges well. For these reasons, one third of companies plan to increase their investments and an even higher share (46%) expect to employ more staff. However, when assessing the development of the UK economy as a whole, firms still take a much more cautious view: only 23% expect the UK economy to perform better over the coming twelve months, with 37% expecting it to perform worse.

The shortage of skills, partly because of the new immigration rules, is the largest challenge for companies with other administrative hurdles, resulting from Brexit, ranking second. Concerns around energy costs are still high on the agenda, but the supply chain pressures on businesses seem to be easing, creating less cause for concern than six months ago. The survey also suggests that it appears to be more important for businesses to develop new markets than to adjust their supply chains.

The recently concluded Windsor Framework, to address the issues arising from the Northern Ireland Protocol, is generally expected to lead to some – much welcomed – improvement in the economic and political relationship between the EU and the UK, but only very few (2%) expect it to have any significant effect on their business activities in the UK.

As we can see the challenges continue to be plentiful, but with the right approach, they can be mastered. We at the Chamber are happy to support you along the way!

The recently concluded Windsor Framework will hopefully lead to a warmer EU/UK relationship. The fact that the Prime Minister was able to command his own (Conservative) majority to pass the so-called Stormont Break in Parliament can be seen as a sign that we will be able to slowly move on from Brexit. In theory, re-establishing a higher level of mutual trust should make it easier to iron out some of the many remaining operational problems. However, it is not certain whether in the near future we will see many additional efforts to ease the practical frictions resulting from Brexit. This is because further improvements depend significantly on whether the Prime Minister will be able to keep the majority of his party on side to develop pragmatic answers to issues triggered by Brexit and the resulting relatively thin Trade and Cooperation Agreement.

The business world welcomes a closer and more productive relationship between the UK and the EU, as it benefits both sides, especially as the vision of a Global Britain has so far remained just that. This can be seen from the recent trade figures, which, when stripping out the distortions from the energy crisis, show that the UK’s global trade performed no better than the one with the EU. Therefore, we at the Chamber will increase our efforts to bring together companies from across the Channel to help seize the many business opportunities, which may have been sidelined due to the recent uncertainty around the future of our relationship. There is so much more we can and should do together, not just in business but also when addressing the manifold global challenges. King Charles’s current visit to Germany will definitely also provide a new impetus for stronger cooperation between our two countries and even if we may need to work a bit harder than in the past to forge a closer relationship, it should and will not deter us from doing so.

The successful conclusion of the negotiations over the Northern Ireland Protocol is welcomed by the German-British business community. This is an important milestone, foremost for Northern Ireland but also for the whole of the UK, the Republic of Ireland and the EU. Therefore, it is important that all relevant political actors in the UK stand behind it now. Only then will there be an opportunity to begin a new chapter in British-European relations, one built on trust, mutual respect and shared prosperity. This is also of huge significance to the business world on both sides of the channel as it needs a reliable and stable framework so that the current and upcoming international challenges can be efficiently addressed together. The conclusion of the negotiations will also enable closer research cooperation across Europe, which was somewhat on hold due to the issues around the Northern Ireland Protocol. Not only will the university sector and the wider research community benefit from this, business will also profit as for many challenges solutions can best be jointly developed.

In addition, the German-British business community hopes that such a new chapter in our relationship across the Channel will also help to find practical solutions to issues in many other areas, for example the short-term posting of workers abroad, which would benefit all parties concerned. Let us hope that everybody from the political establishment in the UK now gets behind this deal so that it can deliver on its promises!

In economic terms, the year 2023 started off reasonably well for the UK and for Germany; the fear of recession has abated and a significant downturn might even be avoided altogether. However, the changing (geo-)political architecture in Europe and beyond will, not only in the short run, lead to higher costs on various fronts: energy, defence, financial and military support for the Ukraine, as well as the extra burden from making supply chains more resilient. These additional costs will have to be borne by all of us and this will have a negative impact on the medium-term overall wealth of our societies and its peoples. Therefore, we all have to strive harder and seize every opportunity to foster sustainable growth and value creation.

In the UK, the costs of Brexit are slowly being accepted and thus forging a closer relationship with the EU to limit the repercussions is thankfully gaining some traction. Hopefully, the issues around the Northern Ireland Protocol will be resolved soon, helping to reopen the road to closer cooperation. This would be of benefit to both sides, but especially to Germany, as it might enable bilateral trade to flourish once more.

An interesting fact to recall is that in the years from 2000 up until the Brexit referendum, the UK’s cumulated growth was at least one third higher than Germany’s (and the EU’s). This higher UK growth provided many business opportunities for companies from the other side of the Channel. However, since the Brexit referendum up until the end of 2022, British growth has been somewhat more subdued and below EU-wide growth. Nonetheless, it is still higher than in Germany, which has largely been held back by a lack of reform and underinvestment in infrastructure. The growth figures for this later period show a cumulated 9% for the UK, but only 7% for Germany, a fact often overlooked by commentators on the continent.

Ultimately, both our countries have to do their homework, so that we will all be in a position to generate the extra income to bear not only the political, but also the financial burden of making our required contribution to tackling the manifold global challenges. Therefore, in 2023 the Chamber will continue to bring businesses together to fruitfully drive international trade, which is not a zero sum game, because it creates opportunities to increase the innovation that drives productivity, a necessary precondition for sustainable growth.

This is the last newsletter of the year and upon reflection, it is not only Germany and the UK that are looking ahead to a challenging 2023. Like many others’, our economies are expected to move into recession, but on a relatively positive note, it will probably only be a mild one. Recently, the Metro newspaper in the UK ran the headline “You’ve never had it so bad”, however when reflecting on the past year, my feeling is that most of us in the UK and Germany should appreciate how fortunate we have been. Our experiences pale in comparison to the people’s in Ukraine who are experiencing terrible suffering as a result of the Russian invasion. Being spared such hardship and with the post-war/post-1989 order in Europe coming to an end, reminds us that we must now take a more proactive role in ensuring our safety, security, and prosperity. In order to do so, we need strong international and European cooperation not only on the political, but also on the economic front. Therefore, it is high time that the problems surrounding the Northern Ireland Protocol are resolved, so that the EU and the UK do not enter into tit for tat trade disputes, but instead focus more of their energies on addressing the wider, more pressing global challenges. Currently, tentative signs suggest that a solution is on the horizon. Such an outcome would also help to revitalise research cooperation between UK and other European universities via the EU’s Horizon programme. One of the repercussions of the differences over the Northern Ireland Protocol is that this cooperation has been held hostage. In turn this has led to an overall weakening of the research landscape across Europe and that is something we can ill afford. Therefore, we will keep our fingers crossed and hope that both sides will work through the issues and come up with a lasting solution.

On this somewhat optimistic note for German/EU-British relations, I would like conclude the year by wishing all of you very happy Christmas and all the best for 2023 and hope to see many of you at the Chamber’s New Year’s Reception on the 5^th of January!

The new Prime Minister has been office for less than a week and we have witnessed a return of many familiar faces to the front benches. Let us hope that the second time around this team will muster the courage to take the necessary and decisive steps to move forward. In addition to tackling the current crises, there is a need to address the long-running structural challenges of the UK economy, such as lacklustre productivity growth, which is crucial for embarking on a path to sustainable growth once again.

The relationship with the EU also needs mending, as the EU is still by far the UK’s largest trading partner. The danger of Britain being excluded slowly from a number of European value added chains is bound to correspond with a negative impact on economic growth and a relative decline in high-level jobs and therefore, should not be underestimated. All these challenges necessitate bold action and will require Britain to get the most out of its open entrepreneurial society. In doing so, it should in principle, be up for such challenges. Therefore, the task of the new government is to create an environment which reinvigorates and unleashes the spirit of Britain, so that she can live up to her full potential. Within this context it was good to discover in our recent survey that for the time being, the German-British business community continues to believe in Britain. Despite the current challenging economic environment, they continue to invest and plan to expand staffing levels in the UK.

King Charles III has already mentioned that with the passing of Queen Elizabeth II, the British monarchy will undergo some changes. In any case, the monarchy still plays an important role for many in the UK and beyond, especially as it often acts as a binding force for societal cohesion, presenting a pillar of continuity in uncertain times. With challenging times ahead, the importance of such a role should not be underestimated. Therefore, I hope that in the years to come the evolving monarchy will continue to play its part.

On a political level, the new UK Government has started its tenure with some bold decisions with regards to taxing (or not taxing, in some cases) and spending. Whilst it received criticism for its policies from many corners, we should not forget that bold moves, as well as steadfastness, are often necessary in times of crisis. Rudyard Kipling’s famous line, “if you can trust yourself when all men doubt you”, springs to mind as a guiding principle. Whether the measures that are due to be introduced over the coming months will support businesses and individuals successfully through the times ahead remains to be seen. Nevertheless, the UK is not alone in seeking measures of cushioning the blow of the energy crisis, with many governments following a broadly similar path. However, the announcements in terms of deregulating the economy are markedly different to what we see currently in other countries. With overregulation being an issue in many economies, one should watch the British policies closely to evaluate whether lessons can be learnt. An openness to new approaches is important, because we all need to make our economies and societies more “dynamic”.

In any event, what we also need is a solution to problems surrounding the Northern Ireland Protocol so that the relationship between the EU and the UK improves and we can all focus more of our resources on jointly addressing the ever more pressing global challenges. A pragmatic approach by both sides and some legislative moves (or not moves) could help defuse the Northern Ireland situation. Let’s hope this happens, so at least one of the many challenges can be overcome!

Winston Churchill’s famous words still resonate today, as with the approaching autumn and winter, times will get tougher for many citizens and businesses. Not only in our two countries, but across Europe and that does not even take into account the suffering in Ukraine, as the war will linger on and not end any time soon. In any case, the rest of Europe needs to keep its resolve and stand together in the light of Russian aggression. Even though the economic costs are high in the short-term, we must live up to our values now, especially as the longer-term political and economic costs would be far greater.

With a new British Prime Minister on the horizon, we hope that British politics will spring back into action and that the very close cooperation on supporting Ukraine will extend into other fields such as increased economic cooperation in Europe. Only by working together across the continent can the costs of Brexit – for both sides – be minimised and global challenges mitigated. Whilst this higher level of cooperation is by no means certain, the German-British business community believes that an increased collaboration is more than desirable. The Chamber has seen sustained interest from British and German companies alike to do business across the Channel. In other words, the foundations continue to be there, but it is now up to political decision-makers to create an environment in which business relationships can prosper to the benefit of all. For example, immigration rules for short-term business assignments need to be simplified by both parties and continued mutual recognition of standards should be a priority. Of course, the willingness to cooperate depends on mutual trust, which, especially because of the issues around the Northern Ireland Protocol, has been in relatively short supply recently. Therefore, now is the time to start rebuilding it.

This summer will be spent on electing a new Prime Minister in the UK. The fact that approximately 100,000 unelected people decide on the leader of a G7 country is, from a German perspective, somewhat peculiar. It is a stark reminder that despite being close neighbours in Europe, we are still markedly different in our systems of governance. In any case, the new Prime Minister will have her or his work cut out: the Ukraine crisis, inflation, energy and supply chain issues, as well as redefining the relationship with the EU will be high up on the agenda. As an organisation representing and fostering bilateral business ties, we hope that the new government will put an emphasis on the latter. We need strong ties and a high degree of unity in Europe to master all the other challenges. A resolution on the Northern Ireland protocol in the near future is by no means certain and many expect that the problems may yet escalate further. Even if this were to be the case, we hope that this problem can be isolated somewhat. That way, we can work as closely as possible together on the issues, which affect us all.

The role of business in making our economies more resilient to external shocks should not be underestimated, because if economic ties in Europe become weaker, we will all suffer in the long run. That is why we at the Chamber will increase our efforts to keep the business relationship between Germany and the UK as strong as possible and I am certain that our members will play their part in supporting this aim.

Despite these challenges, I hope that all of you will have a relaxing summer and hope to see many of our members at our Annual Reception on the 1 September in London.

With the arrival of summer, the heat is on, not only literally, but also politically in terms of the need to address the manifold challenges at hand. The world is under enormous pressure and the feeling is that only just enough is done to avoid boiling point. For various reasons this kind of strategy will not prove to be sustainable and we in Europe must finally live up to our responsibilities. We may also have to manage our expectations and find a more realistic approach even if this may mean that the coming winter will be “colder” for many in the West. It needs to be borne in mind that a large number of people in poorer parts of the world may grow hungrier still and how this will have costly repercussions on global political and economic stability. In other words, the less we sacrifice and show our solidarity now, the higher the long-term cost will be.  Climate change, the war in Europe, and many other challenges follow the same pattern.

The fact that the Northern Ireland Protocol is back on the political agenda, is not a sign that those in politics have grown up and can rise to the challenges ahead. Furthermore, this example demonstrates that many issues cannot be left to politics alone. Business often also has a crucial role to play and make its voice heard. Currently, we also need to have a balanced debate about energy demands and how they can be met realistically. Nuclear power may well be an option to mitigate the looming energy crises, but especially in Germany this debate continues to be a touchy subject and instead the reactivation of coalfired power plants is being considered. Which strategy is pursued, is a decision best left to the experts to judge.  However, what is clear, is that we will finally have to accept that the world is full of difficult trade-offs and that we need to have an open debate about them. Traditionally, Britain has been slightly more pragmatic in addressing such trade-offs and therefore, Germany may well benefit from looking at the British approach. This is just one reason why strong ties across the Channel in politics, society, and business are important and why we at the Chamber will further scale up our support to companies doing business with and learning from each other in these uncertain times.

Unfortunately, the Northern Ireland Protocol has moved up the political agenda again, which is creating unnecessary friction between the EU and the UK. This friction may end up harming business ties and impact economic development across Europe. Therefore, both sides - to varying degrees - need to rebuild trust and be more pragmatic to solve the issues. As European nations, we need to stand and work together in these ever more challenging times. We have done this quite successfully with regard to the Russian invasion of Ukraine. However, as the war in the Ukraine is expected to carry on for many more months, the economic repercussions on the world economy and especially poorer nations will continue to be exacerbated. In addition to supporting the Ukraine, we in the western world must help to mitigate sufficiently the effects of the expected food and energy shortages on the more vulnerable economies across the globe.

Furthermore, the predictions for future economic growth, although having been significantly reduced recently, are probably still too optimistic. The coming winter will be exceedingly challenging as the rising energy costs will continue to bite consumers as well as industry. Potentially rising interest rates, albeit necessary to fight inflation, will have additional implications for economic growth. Therefore, we in Europe must not get bogged down by internal trade frictions, but seize every opportunity to trade and do business with each other to create as many opportunities for growth and wealth as possible. This will help to make the financial means available to alleviate the effects of the many European and global crises. These developments may largely be outside our immediate control, but it is still our responsibility to jointly address them if - in the long run - we all want a more secure and prosperous future.

Following the analysis of our recent spring survey, we can now see that with the war in Ukraine having entered its third month, it is starting to have an impact on more than 50% of our companies’ operations in the UK. In general, however, our community is still in good shape, with half currently viewing their UK operations as performing positively or very positively. A majority also have a similarly positive view of their operations for the coming 12 months. As a result, they will increase their investment and expect to employ more staff.

However, in terms of the overall development of the UK economy, firms are less optimistic, with only 25% expecting the UK economy to perform significantly better over the coming year. In turn, 40% expect a deterioration of the economic situation – in other words, the ‘cooling’ of the UK economy is expected to continue. Currently, the largest challenges for our community are logistical problems in the supply chains, but rising costs for energy and inputs have moved high up the agenda. In terms of policies to address and mitigate climate change, a vast majority does not feel that the UK’s current efforts in this respect are sufficient. However, a majority believes that much more will be done in the future, in turn creating significant business opportunities in renewable energy production as well as the development of energy efficiency solutions for industrial and residential purposes.

We do not know what the immediate future will hold in stock for us and times may well become much more challenging in many respects. That is why it will be increasingly important to become more principled and walk the talk. By doing so, it will help to safeguard the long-term future for our partners and us in and beyond our community of values. This walk will not always be easy, but we can assure you that the German-British Chamber of Industry & Commerce will be there to help you navigate the choppy waters ahead.

Full Results of the German-British Business Outlook

With the European order, as we have known it for the last three decades, coming to an end, we have entered an unprecedented era of uncertainty. According to the economist Frank Knight one cannot even attach probabilities to possible outcomes under uncertainty, therefore planning for what lies ahead of us will become much more challenging. 

We sincerely hope that the war in the Ukraine will end soon and that the suffering of the people will stop. In any case, the world after the war will differ from the one we have known. Amongst other things, a considerable adjustment of supply and sourcing chains will become inevitable. However, in this readjustment process we should be careful not to fully exclude countries from all of our future supply chains and commercial interactions, because this could lead to a creation of parallel economic worlds and make them – as well as us – not only much poorer, but also more isolated, which in turn may create new threats. 

What we all need is a higher level of diversification so that shocks to our systems can be more easily absorbed. However, a side effect of this will be that applying economic measures to influence behaviour will become less effective in future. For this reason, businesses and politics will have to work more closely together to promote a fairer and sustainable world, as well as advancing the rule of law, democracy, and universal values. As these values and economic prosperity are interlinked in the long run, we may need to make significant short-term ‘sacrifices’, but in the end the benefits of following such a strategy will far outweigh its initial costs. The war in the Ukraine has rightly taken most of our attention and the people there urgently need our support. Once the fighting is over, a focus of politics and business should be redirected to all the aspects of the ESG (Environmental, Social and Governance) agenda, so that the world can fairly and safely move forward. 

With Britain being the motherland of democracy and Germany being heavily rooted in the rule-of-law (the Rechtsstaat), both countries have much to contribute to these efforts and can play crucial roles in building the new framework for all of us across Europe and further afield.

The year 2022 provides us with old and new challenges. Many of us hope that the Coronavirus pandemic will near its end over the coming months, but this is by no means certain and on a global level, its effects will be felt for some time to come. In other words, high levels of uncertainty will continue to be with us for 2022 and beyond. In addition, the fast-growing geopolitical challenges are counterproductive for bringing back confidence in the future outlook of our economies.

Germany and the UK may now have largely returned to pre-pandemic levels of economic activity, but the costs for these remarkable achievements, especially in terms of serving much higher levels of public debt, will have to be borne over the coming years. Thus our future financial room for manoeuvre will be somewhat limited.

With travel restrictions potentially being lifted further across Europe, the effects of the new framework of the relationship between the EU and the UK will become ever more visible. As mentioned many times before, not only the customs formalities, but also the visa requirements have impacted a variety of activities across the Channel, making them more difficult or even impossible to carry out. The long-term effect of this will be that our ties may become looser on an economic, political and societal level. In this day and age, when close cooperation is more important than ever, such a subsiding of ties should be avoided.

Therefore, the mission of the Chamber for 2022 is to build and strengthen the linkages between our countries. In order to successfully master the current and future challenges, we should stay as close as possible. Business on both sides of the Channel has a huge role to play, not only in supporting political actions to help promote the rule of law, but especially in driving innovation in the fields of medicine, clean energy or elsewhere. In order for companies to play this role successfully, an active engagement with politics, as well as society in general, will gain in importance. As ever, the Chamber will continue help business to make their voices heard.

In all likelihood the new German government will come into being at the beginning of next week. The start of its inception appears to have gone very smoothly. At times, the coalition talks reminded one of a promising beginning of a school trip; where the choices of every individual child, in terms of room sharing and who is going to sleep in the top or the bottom bunk, were quickly met without too much haggling. However, for the trip to be successful in the end, much more is required. Not falling out over the various activities during the journey will be one of the particular challenges ahead.

There is a significant number of crucial questions that the new government will need to answer: How to finance the green revolution? How to square economic and ecological demands? How to address the global challenges in terms of security and defence? How to deal with the more difficult partner countries to the east of Germany, as well as managing the Covid pandemic on a national and international level, are just a few examples of where there are bumpy roads ahead.

Nevertheless, we hope that this German government will be able to find innovative answers to many of these issues. Germany is in need of fresh thinking and being in the centre of Europe, it also needs to take a more active role in many fields. Of course, this will inevitably lead to criticism from many quarters not only at home, but also abroad. However, if as many commentators think that the coalition is in it for the long term, it needs to have a coherent approach to productively manage the many conflicting demands. Not only the longer-term success of this government will be in doubt, but also Europe’s future will become hazier, if Germany does not play a leading and constructive role.

Hopefully, strong cooperation with Britain will also be on the agenda of the government, as we still have so much to learn from each other. Despite some choppy waters ahead, we at the Chamber will work to maintain and improve the bilateral business relationship.

With the year coming to its close, I would like to take the opportunity to thank all of our members who supported us throughout the last year. We sincerely hope that we were able to assist you in terms of navigating Covid and Brexit. We wish everyone not only a Merry Christmas, but also a well-earned rest over the festive period, especially as the coming year will continue to bring many challenges for all of us. However, one thing is certain; we at the Chamber will continue to be there to support you in 2022.

The most likely outcome of the recent election in Germany is a government with Olaf Scholz from the Social Democrats as the new Chancellor. This prediction is not only based on the Social Democrats winning the most votes but also on the preference of the voters of the Green Party which on balance more strongly favour a coalition with the Social Democrats than the voters of the Free Democrats favour a coalition with the Christian Democrats.

What would such a new government between the Social Democrats, the Greens and the Liberals mean for Germany?  With the Greens entering the government a stronger focus on combating climate change can be expected. In principle, all parties agree on the urgency to address this issue but not necessarily on the means and the timeline. The Free Democrats often want to use the market mechanism to solve some of the challenges whereas the Greens may well be more interventionist. But what else can we expect? Before the election most commentators predicted that politics in Germany will not change much as long as the Left Party does not enter the government. As this is arithmetically not possible major policy shifts are not really expected. Therefore, even if my prediction is wrong and the next Chancellor comes from the Christian Democrats, policies will not change much.

However, Germany, in addition to climate change, faces many other challenges and these have become even more visible during the Coronavirus pandemic. Digitising the public administration to make it more efficient, building up a digital infrastructure, necessary for a thriving service and industrial sector and making the education system fit for the future are just some examples where action is urgently needed on a national level. German society also has to become more entrepreneurial and dynamic as some of the certainties of the past no longer exist. Germans have to learn that one cannot always rely on the state.  For example, the demographic challenges cannot be solved by the public purse alone – systems need to be reformed further and that means that new answers have to be found and old ideologies be updated to come up with workable solutions. In essence, change is needed in many areas but it may have to be accompanied by a reassuring and stable government in order to achieve it. Germans are on average probably less entrepreneurial than the British, explaining why they voted for a bit of change but also some stability.

As a business organisation believing in change creating opportunities, we hope that the next German government will be able to strike the right balance between these two poles.

The analogy to Fawlty Towers used in the headline should not deflect from the fact that it is fair to say that the German-British community is united in wishing Gareth Southgate and his team all the best for the next game - they deserve it. The European Championship, despite some criticism directed at UEFA, has given us a return to a sense of normality. Hopefully, this will not be a false sense of normality, as the recovery from the pandemic in Europe is still some nine months off. This is assuming that everything goes to plan in terms of the rollout of vaccines and their efficacy. We should also bear in mind that for many other countries around the globe the recovery will take much longer and that this will have political and economic repercussions for all of us in the coming years. In other words, uncertainty will play a much larger part in our lives and as a result, we have to become more flexible and entrepreneurial to manage the more volatile environment.

The UK has always had a strong entrepreneurial spirit and is therefore in a relatively good position to cope with these challenges. In Germany, it will be one of the tasks of the next government to somewhat “rejuvenate” the country in terms of advancing digitalisation, improving education, infrastructure and so on. Societies may also have to become fairer and more responsible in the eyes of their citizens, so that the necessary buy-in to the changes can be obtained from all parts of society. Germany and the UK not only share common interests in terms of combating climate change, but also in many other fields and we hope that a strong bilateral relationship will also be on the agenda of the future German government. This is especially important as the new regulatory framework between the EU and the UK continues to pose challenges for many of us, not only in the business community. To successfully iron out the still many problems so that trade and investment can flow as smoothly as possible across the Channel, we need a solid British-German relationship and the Chamber will continue to support and work on this in the years to come.

The world is changing, but it appears that the light at the end of the Covid tunnel shines a bit brighter these days. The contours of the new relationship between the UK and the EU are also becoming clearer. Going forward, it is now up to all of us in the business community to make this relationship as successful as possible. One should not expect the EU-UK Trade and Cooperation Agreement to undergo major changes in the years to come – it is what it is and, in essence, it is now about adjusting one’s business to the new framework. Supply and value added chains will be modified to take account of the new regulatory structures. However, the necessary modifications also offer some opportunities to really evaluate and optimise processes in more detail. The coronavirus pandemic has already forced many of us, especially in the service sector, to change how we operate. Efficiency gains have been made by many, but the flipside of the coin is that some activities will no longer be in a high demand, with physical retail being just one example. All these changes will lead to a profound shift in employment patterns and to the way our societies work.

Substantial investment in retraining and upskilling will become hugely important to provide opportunities for people who would otherwise be left behind. To build back better, we need to invest in these activities so that the the gap between rich and poor, or better between franchised and disenfranchised, does not become too great for societies to cope with. These are challenges observed in many countries around the globe. Britain and Germany can and should take an active role. Britain with its flexible approach to entrepreneurship and ability to capitalise on new and emerging opportunities and Germany with its expertise in vocational training and industrial strength can work in tandem – by learning from each other and by spreading the word. To some degree the Chamber is based on the German system and will amongst many other activities, aim to provide and build new linkages in these areas.  For now, spring is in the air and we will work on turning a few green shoots into something bigger over the coming months and years.

Of course, we will also continue to provide up-to-date information on the current challenges and regulatory developments on our webpage. We also hope to welcome many of you to our events, even if only in a virtual format for some time to come.

Some may even say ‘Global Britain’ has won over ‘Little Britain’. However, depending on one´s point of view, one ‘battle’ over future cooperation may have been won, but there is much more work to do!

The difficult negotiations about a future trade deal between the UK and the EU have come to a positive conclusion, something that is much welcomed by the German-British business community. We do not know all the details yet, but make no mistake,major change is still in the air and the way commercial transactions will be carried out across the Channel will significantly change on 1  January 2021.

From day one, trade in goods and services will become more expensive and in some cases it may even come to a standstill, especially as the new immigration law takes effect, potentially making the provision of some cross-border services impossible. As always, the devil lies in the detail and many of the details have been overlooked so far or have not been given enough consideration (how to deal with many of the still unclear customs formalities serves as one immediately pressing example). Many SMEs in the UK and in Europe will find trading with one another more expensive and in some cases prohibitively so. That a comprehensive deal on the future of the relationship could not be agreed upon will come at a price; lost opportunities,  not only for many smaller businesses, but also for larger ones, as the regulatory costs will start to bite even more in the months and years to come. This in turn will reduce competition and, in the end, will make life more costly for all of us. 

However, this free trade  deal is hugely important, as an acrimonious divorce between the UK and the EU would have come at an even higher cost and  potentially led to an erosion of the basis for future communications across the Channel. Using Theresa May’s words, one thing is clear: Britain has left the EU, but not Europe. Wemust continue to work together to address global challenges, be that Covid-19,  climate change, upholding the rule of law and poverty-induced global migration.

We should also bear in mind that Brexit in its current form will reduce the opportunities for young people to experience other cultures. Internships, work experiences and study opportunities in the UK  and in Europe will in some cases become impossible from an immigration point of view or at least more costly, especially as the financial support from the Erasmus programme will fall by the wayside. To build a future in the Europe which we inhabit together, both the EU and the UK should work on developing a new framework to enable exchange and opportunities so that individuals and businesses can continue to learn from and to get to know each other. If the next generations, unlike those in the past, do not have such opportunities, maintaining  important linkages across the Channel will become more difficult and the younger generation of today will be unnecessarily deprived of opportunities. Therefore, the work is cut out for both sides to design a framework which enables opportunities, growth and prosperity for all. Both sides should be held accountable for this. The German-British Chamber of Industry & Commerce and its members are ready to support the process of building this future framework.

Our recent autumn survey shows that companies are still very much affected by the Coronavirus pandemic, even if they have been able to adjust to some extent. The worst economic effects they had feared earlier in the year have so far not materialised. However, with winter coming we do not know what is in stock for all of us. The same is true with regard to Brexit negotiations – will we see a deal being clinched at the last minute or not? I am still somewhat optimistic that there will be a deal. Nevertheless, one should not make the mistake that a deal will solve all issues. Whatever the outcome of the talks, the end of the transition phase will lead to disruption for many, as new border formalities will come into place. Even if tariffs and quotas are avoided with a minimum deal, the administrative burden for companies will increase substantially. Whether the appropriate technology will be fully up and running by 1 January 2021 has also been doubted by many. Therefore, preparedness is everything and - as reiterated many times - building up stocks to ensure supply is one remedy, but also reviewing the logistics chain and documentary requirements with your service providers is crucially important for managing the immediate challenges. In the long run regulatory divergence and trading under a different regime will create additional problems. For example, adjusting supply chains to meet rules of origin requirements will often be a very costly exercise. Regardless of the outcome of the negotiations, new immigration rules will come into force on 1 January and this will mean more bureaucracy for companies needing to “import” skills, which are not available in the UK. As always, the devil will be in the detail, which often still remains largely unknown.

The coming months will be testing for all of us. We at the Chamber will continue to adjust our offering to best support you during this time – you can count us!

The British writer Robert Harris recently said in an interview “at the beginning of a crisis people often make hope their prediction”. A few days ago, I spoke to my sister-in-law who is a medical doctor in an Intensive Care Unit and she said that we might find a vaccine against Covid-19, but it might not be as effective as we hope. A good example is the annual flu vaccine, which works, but does not provide full protection. If we look at possible medication for Covid-19, we also might not see one which fully works. In other words, we may well have to live and cope with an increased level of risk for many years to come. This is new to many in the developed world, but we should not forget that other economically less developed countries have been able to live and cope with a number of diseases like malaria, against which you can take precautions, but not always rule out catching it. Aids is another example. It can be treated so that one can live with the symptoms, but there is no real cure. Therefore, we all have to improve our ability to evaluate, manage and take risk. Currently, we see governments, for obvious reasons, becoming more powerful and many economists are predicting the same for large corporations, as these two actors complement each other in a crisis. However, in the longer term this might lead to a rise in oligopolistic behaviour, which often has negative side effects for citizens and consumers. What we should not forget is that the evaluation, management and especially the taking of risk are entrepreneurial qualities, which we will all need much more of in future. However, the smaller entrepreneurial companies are often the ones who suffer most. We need these companies to learn from their thinking and skills, as otherwise the long-term management of how to live with COVID-19 may be far more difficult.

Coming back to the elephant in the room:  Brexit. We will most likely see the end of the implementation period on 31 December 2020. Whatever the original merits of the Brexit decision, many continue to apply the hope and prediction analogy here as well. Again, larger companies, despite the costs, will be able to deal with the disruption in the end. (The question still remains who will bear the cost of the disruption – the consumer or the producer?) Again, it is the smaller firms, which will suffer most, as they do not have the capacity to deal with the regulatory, financial and other challenges. As a result, entrepreneurial capacity will be unnecessarily curtailed and this may well have another negative long-term effect on economic development. In recent weeks, we at the Chamber, in addition to all our other activities, have supported numerous small and medium-sized companies with first-hand and quick advice to help them navigate the Corona challenges. We will continue to do so over the coming months and years, as we feel it is vital to support entrepreneurial thinking so that in concert with all other actors, we can manage the changing times ahead, be that Covid-19, Brexit or anything else the world might have in store for us.

The UK government’s strategy of de-aligning more than 40% of its trade in order to seek regulatory alignment for less than 20% does not appear to be logical in economic terms. Therefore, the advice by James Carville to Bill Clinton in 1992 may no longer hold true. Questions of identity and so on may have become more important for large segments of society and as a result have been translated into policies. How long these other factors will stay that important remains to be seen, as the economic journey from dealignment to new alignment will definitely not be frictionless and will involve some costs (even the Chancellor of the Exchequer admitted that recently). Of course, one could argue that in the long-run (in which we are all dead) this strategy may make sense, as the economic performance of the EU has been in relative decline in comparison to America’s. However, according to the Centre of European Reform, the UK economy has already lost approximately 3% of its potential economic growth since the referendum in 2016. Therefore, it is crucial for the UK government to manage this “realignment” period well in order to minimise its overall negative economic impact. This is especially important, as it has also promised to look after UK regions, which are in need of more investment. Geographically rebalancing the UK economy will be particularly important from a societal point-of-view, but will also be costly - in other words, the current government’s economic challenges are twofold.  On the other side of the Channel the EU and its member states with Germany at their helm, must substantially step up efforts to become more dynamic and produce much higher growth rates. This in turn would also make it more attractive for the UK to stay closely aligned to the Union. This is something we will be working towards, not just in 2020, but also in the years further ahead, because we all still need to jointly address many other challenges, ranging from climate change to a fracturing world economic and political order.