Brexit an ‘economic disaster’ for trade between UK and Germany, say economists

The downturn in UK manufacturing has deepened as post-Brexit trade checks weakened overseas demand (PA Wire)

Brexit has been an “economic disaster” for trade and investment ties between the United Kingdom and Germany, leading to a fall in German direct investment and seeing the UK decline in importance as a trading partner, German economists warned on Thursday.

Britain voted on June 23, 2016, to exit the European Union and it left the EU’s single market at the start of 2021.

“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 damning assessment contrasts with the refusal of many ministers in the UK government to even acknowledge that Brexit has caused economic harm to the country.

Last year, Germany exported goods worth 73.8 billion euros (£63.5 billion) to the UK, 14.1 per cent less than in 2016. The year of the referendum, the UK was Germany’s third most important export market, but by 2022 the country had slipped to eighth place, Mr Treier said.

As a trading partner – measuring combined exports and imports – the UK has lost even more importance since then, dropping from fifth to eleventh place, he added.

The volume of German direct investment in the UK has also declined. In 2021, it was around 140 billion euros (£121 billion), a decline of 16.1 per cent compared with 2016.

According to the DIHK, some 2,163 German companies are now active in the UK, 5.2 per cent fewer than in 2016.

Many British companies meanwhile have settled in Germany in recent years, with a slow haemorrhaging of jobs from the City across the Channel believed to be taking place.

Germany Trade and Invest (GTAI), an organisation that helps international companies set up business in Germany, has counted more than 1,000 new businesses from the UK since the Brexit vote.

Last year alone, there were 170 new businesses, a number surpassed only by companies from the US and Germany’s neighbour Switzerland.

“We expect inquiries from the UK to remain at a high level,” said GTAI Managing Director Robert Hermann. “It is important for British companies to have a foothold in the EU.”

Germany’s size and central location are an advantage when it comes to attracting UK companies, he added.

“The UK’s exit from the EU has made our close trade relations more difficult and there is still considerable planning and legal uncertainty in the UK business of German companies,” said Mr Treier.