Thilo Brodtmann, general manager of the Germany Engineering Association (VDMA), gave a doom-laden assessment of the current state of play regarding Brexit, as leaders gathered in Davos, Switzerland for the World Economic Forum.
He said: “The fact that [Mrs] May only touched on the topic of Brexit in her speech at the World Economic Forum speaks volumes: it was a diversionary tactic, and even one and a half years after the referendum, the British Government does not seem to be pursuing a clear plan to leave the EU.”
As time wore on, the VMDA was becoming increasingly pessimistic about the prospects of the negotiations being successful, Mr Brodtmann said as he warned its member companies to prepare for the worst.
He said: “It is hard to believe that Britain is leaving the single market and the Customs Union without significantly impacting economic relations with the EU. The stagnating negotiations so far give little hope that there will be more than a simple Free Trade Agreement at the end of the talks. That would be a significant step backwards compared to the status quo.”
Mr Brodtman said he was concerned positions were becoming so entrenched negotiations would consequently prove very difficult.
He said: “The British government is making promises to its citizens that it is unlikely to be able to keep, which increases the risk that, in the end, there will be no negotiable agreement between the EU and the UK that both sides can live in. Companies should also prepare for this scenario.”
With the March 2019 deadline barely a year away, the VDMA is pushing for the forthcoming negotiations about the future relationship of the EU and UK to speed up. A contract must be in place setting out arrangements for the planned transitional phase up until the end of 2020, he said.
Mr Brodtmann said: “Companies are faced with the question of how tariffs and bureaucratic customs clearance can be prevented, and it is also important to avoid that the UK and the EU develop different standards over time and thus create technical barriers to trade.”
In 2016, the UK was the fourth largest export market for mechanical engineering in Germany with an export volume of 7.4 billion euros. However, exports to the United Kingdom in the first nine months of 2017 have already decreased by 4.5 per cent compared to the same period of the previous year.
Mr Brodtman warned the British government not to rely on German industry to push the EU to make far-reaching concessions in the Brexit negotiations.
He said: ”The mechanical engineering industry expects a constructive attitude and ability to compromise from the EU. It is quite clear that the functioning of the EU and the single market must not be jeopardised just to help Britain with a possible trade agreement.”
The VDMA represents more than 3,200 member companies of medium-sized machine and plant engineering. With currently 1.35 million domestic workers and a turnover of 215 billion euros (2016), the industry is the largest industrial employer and one of the leading German industries overall.
(Additional reporting by Monika Pallenberg]