consequences after Brexit
Great Britain out of Germany’s top ten trading partners
04.12.2022, 07:40
Although trade in goods between Britain and Germany has been growing in recent months, the UK is no longer among the top ten trading partners. The reasons are varied.
Britain is becoming less and less important as a trading partner for Germany after Brexit. This year, the UK will drop out of Germany’s top ten trading partners for the first time in recent history. This is what emerges from an analysis by the federal company Germany Trade and Invest (Gtai), available to the German press agency in London.
Seasonally adjusted calendar and commodity trade between January and October grew 13.7% over the same period last year, mainly due to inflation. However, all of Germany’s foreign trade in goods increased by 20.7% over the same period. More recently, the Czech Republic overtook Great Britain in the ranking of most important trading partners. The advantage is “significant and unlikely to be recovered in November and December,” commented GTAI. “The slow development of German-British foreign trade is not a new trend,” the report points out. Since 2017, the first full year after the Brexit referendum, the importance of the UK has steadily declined. At that time it was still the fifth most important foreign trading partner.
A number of causes
There were other reasons for Brexit. “Both the coronavirus pandemic, energy price-driven inflation and the Bank of England’s monetary policy reversal have knocked Britain’s economic engine out of sync,” she said. “The aftermath of Brexit amplifies the effect because trade across the customs border has become more expensive,” says GTAI. There is still uncertainty. “Nearly three years after Britain left the EU, the course of the country’s post-Brexit economic policy remains unclear and is shocking British businesses.”
Great Britain left the European Union at the end of January 2020 and as of January 2021 is no longer part of the EU customs union and internal market. While the last-minute Brexit trade deal guarantees duty-free conditions in most areas, trade challenges remain due to increased red tape. The introduction of costly and time-consuming work visas for skilled workers also makes cooperation more difficult.
No good prospects
The outlook for 2023 is also hopeless, according to GTAI, especially as the central bank believes Britain is entering a long recession and companies are likely to be even more reluctant to invest. This concerns the delivery of vehicles, industrial machinery and chemicals, where Germany is one of the most important suppliers. “With the recession on the horizon, rising funding costs and a UK corporation tax hike from 19% to 25% in April 2023, there is no sign of the trend reversing,” notes the report.
Of particular interest to German companies are some smaller industries, which have developed much more strongly despite the economic problems. These included healthcare, offshore wind power and infrastructure construction. The GTAI sees mixed signals from the major automotive industry, the most important pillar of British-German trade. If the UK car market does indeed grow significantly in 2023, that could spell a turnaround, he said. Electric cars are an important engine and the sale of new cars with classic combustion engines will be banned from 2030. The question here is whether Great Britain can build sufficient so-called gigafactories in good time for the production of batteries.
