German companies ‘panicking’ as Brexit looms: Shock survey reveals true Germany sentiment

Business leaders are becoming increasingly concerned by the prospect of disruptions to supply chains and added customs red tape.

With barely a year until the UK leaves the EU on March 30, 2019, the pressure is on to strike a deal over the trade relationship between Britain and the bloc, with German companies desperate for some clarity about the future. 

Eric Schweitzer, President of the German Chamber of Commerce and Industry (DIHK), said: “Even rudimentary outlines of future relationships are not yet apparent.”  He added that for German companies, Brexit was beginning to pose a “barely calculable risk”.

The Chamber’s business survey 2018, based on a survey of 900 German companies, suggested Brexit was already beginning to have a detrimental impact, explaining: “The trade of German companies with the United Kingdom is already decreasing significantly.”

Last year, German exports to the United Kingdom dropped by two percent to £74billion (€84billion), while exports to the rest of the world rose by nearly five percent, suggesting that the UK had lost its importance as a target market.

From being the third largest sales market for German products, the UK had now slipped to fifth place, with total trade with the British – the combined total of imports and exports – amounting to €121.5 billion euros last year. The report predicts that the downward trend will probably increase, with companies surveyed expecting “significantly worse deals” in 2018.

In total, 36 percent of companies expressed pessimism, with just 12 per cent expecting improvements in trade with the British following Brexit. The vehicle industry and its suppliers are especially pessimistic.

Over the decades of Britain’s membership of the EU, many extremely efficient supply chains have developed which could now be destroyed. According to a study by the Cologne-based IW Institute, the aviation and automotive industries in particular, as well as the chemical industry, are heavily reliant on British input.

The German car manufacturer BMW, for instance, has components and engines built in the UK and owns Mini and Rolls-Royce car brands.

But other industries are also affected. The European pharmaceutical association EFPIA has warned of supply shortages on certain medicines by disrupting supply chains in the case of an uncontrolled Brexit.

EFPIA chief Nathalie Moll warned: “For life-saving or quality of life enhancing medicines neither the EU nor the UK can afford to wait any longer for the cooperation from the day the UK leaves the EU to be secured.”

German companies are trying to prepare themselves, with 79 percent of those surveyed having made efforts to assess the impact of Brexit – but just one in seven feels adequately prepared. The report adds: ”More than half of the companies cannot estimate the consequences even after a deeper examination of the topic.”

One in 12 companies is planning to shift its UK investments to other markets, mostly elsewhere within the EU.

One of the chief concerns highlighted is bureaucracy. The Chamber estimates that in the future an additional 14.6 million customs declarations will have to be processed annually, affecting 30,000 German exporters of goods to Britain and 40,000 importers. Additional costs are expected to amount to 200 million euros annually.

As for free movement of goods, uncertainty reigns, with options ranging from a preservation of the single market and customs union to going back to the rules of the World Trade Agreement (WTO) all being possibilities.

The report states: “According to the current situation, a free trade agreement between the EU and the UK seems to be the most likely model of future relations.”

It also remains unclear whether a transitional phase will follow and how long it may take. 

Next month, negotiating guidelines will be agreed on at an EU Council summit next month, with the ratification of an EU exit agreement with the British due to follow October.

Mr Schweitzer warned: “In my estimation, the Damocles sword of the No Deal continues to hang dangerously over our bilateral economic relations.”

Even for this “worst case”, companies needed to know whether institutions such as customs administrations and new licensing agencies would already work on March 30, 2019 under new conditions.

(Additional reporting by Monika Pallenberg)