German companies and Brexit “A big disappointment”

Status: 16.06.2021 5:08 p.m.

New customs controls, more bureaucracy, additional costs: Brexit is causing many German companies to consider whether they can still maintain locations in Great Britain. By Aylin Dülger, tagesschau.de Little of what Heller makes stays in England. The company from Nürtingen near Stuttgart operates worldwide. The mechanical engineering company exports components that are installed in machines for milling engine and metal parts at the UK site of Redditch in the county of Worcestershire. From there they reach end customers in many different industries. Both export and import are part of day-to-day business. Brexit will put this business to the test. “For a long time we clung to the illusion that in the end a solution based on partnership would emerge,” says Heller boss Klaus Winkler. Instead, the Brexit agreements created a very bureaucratic construct.

05/31/2021

The truck takes eight days instead of three

Like many of the small and medium-sized companies that form the backbone of the export-oriented German economy, Heller is now struggling with additional customs controls and bureaucracy. “We have a completely different form war,” says Winkler. “A truck that we send from Nürtingen to England now takes between eight and ten days. We used to do it in three days.”

Klaus Winkler, Head of the Heller Group: “Long indulged in an illusion” The Chamber of Commerce and Industry also moved in April British Chamber of Commerce in Germany a first sobering Brexit balance sheet . Two thirds of the companies surveyed assessed the effects of the new foreign trade rules with Great Britain more negatively than expected at the beginning of the year. More than three quarters of all respondents reported difficulties in moving goods. And almost every fifth company has therefore decided to completely stop foreign trade with the island.

05/12/2021

Fear of withdrawal

For Heller, completely forgoing foreign trade with Great Britain is a horror scenario that the company is trying to avert. Business has been slowed down enormously, said Winkler. “We had to convey to our colleagues in Great Britain in a credible manner that we do not intend to question the location in Redditch, but rather to preserve it if it can somehow be done.” In order not to jeopardize its competitiveness, the special machine manufacturer will have to constantly reassess the situation in the near future. Because if the products become too expensive, customers threaten to turn to competitors – the location could no longer be held.

04/28/2021

Smaller companies more affected

Smaller companies in particular suffered from the additional administrative effort, according to Ulrich Hoppe, head of the German-British Chamber of Commerce and Industry (AHK) in London. That makes it no longer economically viable for many to serve the British market. “The medium-sized and large companies that are active in the United Kingdom are of course also struggling with the additional effort, but they can cushion it much better,” explains Hoppe. Despite the additional costs, the British market will remain very important due to its strategic importance. In 2020, Germany exported goods worth 66.85 billion euros to Great Britain. That was around 5.5 percent of total exports. This made the United Kingdom the fifth most important export market for the Federal Republic of Germany. So that German companies do not leave the island in the future, Heller boss Winkler would like to make goods traffic easier . He is hoping for less bureaucracy on the part of the English authorities, so that the additional effort can be reduced to a more bearable level. For the time being, however, disillusionment dominates. Even if Heller wants to stick to its British location: “Overall, Brexit is a big disappointment for us.”

From Constantin Röse, ARD stock exchange studio Five years: That’s how long EU and British diplomats have been fighting for Brexit. With the Vote in the European Parliament the agreement is now closed – but with a clear warning from Commission President Ursula von der Leyen that this agreement has “teeth”. That sounds more like a threat than restarting relationships.

Northern Ireland contentious issue

So is the ongoing EU-UK dispute going on? No, says Jörg Krämer, Commerzbank’s chief economist: “We’ve seen the big brawl a long time ago. But there are still open issues.” For example the situation in Northern Ireland: The EU complains about violations of the UK against the exit agreement. This actually guarantees open borders between the British province and the EU member Ireland. However, the UK doesn’t like this. However, Krämer considers it unlikely that the EU will react to this with punitive tariffs. “I do not believe that this conflict will escalate to such an extent that the European Union will introduce tariffs on the movement of goods,” says the economist, because: “The European Union would cut its own flesh.” If you look at the total exports of the EU to Great Britain, they did not decrease in January.

Bureaucratic hurdles deter companies

The picture is very different in the case of German-British trade relations. German exports to Great Britain collapsed by 30 percent in January compared to the previous year. The mood in German companies is correspondingly bad. Customs formalities in particular are a thorn in their side for companies that want to export goods to the island, explains Carsten Brzeski, chief economist at ING Bank. “You were in part surprised by all these bureaucratic hurdles that have now been built up by the fact that Great Britain is no longer a member of the European internal market.” This leads to higher costs and more bureaucracy, according to Brzeski, and that scares some companies off. According to a survey by the British Chamber for Commerce in Germany and the consulting firm KPMG, 17 percent decided to stop foreign trade with Great Britain completely because it is no longer worthwhile for them.

Still many questions unanswered

In this divorce, however, it also becomes clear that many issues are still unresolved: What is the future of deep-sea fishing? Or how do the EU and Great Britain deal with financial services? Economist Brzeski does not yet believe in a quick relaxation between the mainland and the island. “In the coming months – probably also in the course of this entire year and also next year – we will see the negative consequences of Brexit rather than being able to talk about new opportunities here.” If anyone sees opportunities, it is the Brexit hardliners. You like to refer to the strong economic forecasts. According to this, economic growth in Great Britain is expected to be around six percent this year, in Germany, for example, only around 3.5 percent. The British economy owes this primarily to the vaccination success in the country – and by no means to Brexit. You will only really be able to see the consequences of this after the pandemic.

The export business of Chinese companies experienced a strong boost in March. The increase was 30.6 percent compared to the previous year, as the statistics office in Beijing announced. That is a little less than experts had forecast. By contrast, imports climbed 38.1 percent faster than expected. Overall foreign trade increased by 34.2 percent in March – the ninth consecutive month of growth. For the entire first quarter, this results in an increase in exports of 49 percent. Imports increased by 28 percent. Regarding the growth rates, however, it should be taken into account that the previous year’s level was very low due to the Corona crisis. In addition, the pace of growth is slowing compared to the first two months of the year.

“A positive signal”

Nonetheless, experts are optimistic: “The strong foreign demand is likely to continue in the second quarter as the global economy continues to recover,” said economist Nie Wen of the Hwabao Trust. “But as global vaccination efforts accelerate, industries in other countries will gradually start up again.” The numbers are “a positive signal that global economic and trade activity is recovering and market confidence is growing,” said a spokesman for the customs office, Li Kuiwen. However, he warned that the global economic situation remained complex and serious.

Engine of the world economy

But the world economy is benefiting from the buoyant economic recovery in China. According to the customs authorities, imports from Germany rose by 28.4 percent in the first quarter. China delivered 60.5 percent more goods to Germany. Experts see the demand from the Chinese economy as a major reason for the relative robustness of German industry in recent weeks. Trade with the US is also flourishing. Despite the trade war and punitive tariffs, Chinese exports to the USA rose by as much as 74.7 percent in the first three months of the year. Imports from the USA increased by 69.2 percent. Germany is back in growth The world’s second largest economy after the USA will grow by a strong 7.8 percent this year, according to a forecast by the industrialized nations organization OECD, after being the only large country to grow in 2020 despite the corona crisis. For comparison: The Federal Reserve is forecasting economic growth in the US of 6.5 percent for the current year. Optimism is growing: in December, the Fed had only expected an increase of 4.2 percent. The federal government is currently forecasting an increase of only three percent. A few weeks ago, important economic institutes in Germany revised their forecasts downwards in view of the corona situation. On Monday, the three major industrial associations in Germany expressed their cautious optimism about the economic development. As a result of strong Chinese economic data, oil prices are rising today as China is one of the largest oil importers in the world. The prospects for a global economic recovery could also prove to be a driver for prices on the commodity markets in the future. That, in turn, could cause inflation rates to rise, as experts keep saying.