Brexit Causes Economic Disaster for Trade and Investment Ties Between UK and Germany
BERLIN, June 22 (Reuters) – German economists have warned that Brexit is proving to be an “economic disaster” for trade and investment ties between Britain and Germany. The decision to leave the European Union has caused a drop in German direct investment and has reduced Britain’s role as a trading partner.
The UK voted on June 23, 2016, to leave the European Union and officially left the EU single market in early 2021. Since then, the consequences of Brexit have become increasingly apparent.
“Brexit is an economic disaster for both sides of the channel,” said Volker Treier, head of foreign trade at the German Chamber of Industry and Commerce (DIHK). The impact on trade and investment between the two countries has been significant.
Last year, Germany exported goods worth 73.8 billion euros (80.57 billion dollars) to the United Kingdom, which was 14.1% less than in 2016. In the year of the referendum, the United Kingdom was the third most important export market for Germany. However, by 2022, it had slipped to eighth place, according to Treier.
Not only has the UK’s importance as an export market decreased, but it has also lost significance as a trading partner when measuring exports and imports combined. It has fallen from fifth to 11th place, highlighting the negative impact of Brexit on bilateral trade.
Furthermore, German direct investment in the UK has declined. In 2021, it amounted to around 140,000 million euros, representing a decrease of 16.1% compared to 2016. The DIHK reports that there are currently 2,163 German companies operating in the UK, which is 5.2% less than in 2016.
On the other hand, many British companies have established themselves in Germany in recent years. Germany Trade and Invest (GTAI), an organization that assists international companies in setting up business in Germany, has recorded over 1,000 new companies from the UK since the Brexit vote. In 2022 alone, 170 new companies were registered, a figure surpassed only by companies from the United States and Switzerland.
“We expect inquiries from the UK to remain at a high level,” said GTAI managing director Robert Hermann. He emphasized the importance of British companies gaining a foothold in the EU.
Germany’s size and central location have proven advantageous in attracting British companies. However, the UK’s departure from the EU has created difficulties in maintaining close trade relations, leading to considerable legal and planning uncertainty for German companies operating in the UK, according to Treier.
The economic consequences of Brexit continue to unfold, and both Germany and the UK are grappling with the challenges it presents. As trade and investment ties between the two countries suffer, it remains to be seen how the situation will evolve in the coming years.
(1 dollar = 0.9160 euros)
(Reporting by Rene Wagner; Writing by Maria Martinez; Editing by Emma Rumney; Editing in Spanish by Tomás Cobos)
What factors have contributed to the decline in German companies’ investments in the UK
Has German exports to the UK been affected, but German investment in the country has also seen a decline. German companies have been hesitant to invest in the UK due to uncertainties surrounding Brexit. The German-British Chamber of Industry and Commerce reported a 64% drop in German companies’ investments in the UK in 2021 compared to the previous year.
The reduction in trade and investment ties between the UK and Germany has led to job losses and economic hardships in both countries. The automotive industry, which heavily relies on cross-border trade, has been particularly hard hit. German carmakers, such as BMW and Volkswagen, have experienced a decline in sales in the UK, while British car manufacturers, such as Jaguar Land Rover, have faced difficulties exporting to Germany.
The disruption in supply chains and increased trade barriers resulting from Brexit have also had a negative impact on smaller businesses. Many small and medium-sized enterprises (SMEs) in Germany, which relied on the UK market, have been forced to seek alternative trading partners.
Furthermore, the financial services sector, which plays a crucial role in both economies, has faced significant challenges. London has historically been a financial hub, attracting numerous German financial institutions to establish a presence in the city. However, since Brexit, many of these institutions have relocated their operations or established new hubs within the EU. This has resulted in a loss of jobs and expertise in the UK.
The economic consequences of Brexit have been compounded by political tensions between the UK and EU. The negotiations for a post-Brexit trade deal were lengthy and difficult, causing further uncertainties for businesses.
While both the UK and Germany have taken measures to minimize the negative impacts of Brexit, such as implementing trade agreements and establishing new trade routes, the damage to trade and investment ties between the two countries is expected to be long-lasting. It will require significant efforts and time to rebuild and strengthen the economic relationship between the UK and Germany in a post-Brexit era.
It’s disheartening to see the negative impact of Brexit on trade and investment ties between Britain and Germany, as highlighted by German economists. The decline only emphasizes the need for both countries to find alternative solutions and work towards a mutually beneficial relationship.
The impacts of Brexit on economic ties between Britain and Germany are proving to be significant, as German economists highlight a decline in both trade and investment links. This suggests a challenging road ahead for both countries to overcome the hurdles posed by the UK’s exit from the European Union.