Six years ago, the majority voted in favor of Brexit. The impact of the decision on the German-British trade relationship is now becoming more and more clear.
The UK is becoming less and less important as a trading partner for Germany after Brexit. This year the UK will drop from the top ten German trading partners for the first time in recent history. This emerges from an analysis of the federal company Germany Trade and Invest (GTAI) open to dpa.
The change in goods, adjusted for calendar and seasonal effects, between January and October increased by 13.7 percent compared to the same period of the previous year, mainly due to inflation. However, in the same period, Germany’s entire foreign trade in goods increased by 20.7 percent.
Recently, the Czech Republic surpassed Great Britain in the ranking of the most important trading partners. GTAI commented that leadership is “important and difficult to make up for in November and December”.
Developments increase the impact of Brexit
The report emphasizes that “slow development in German-British foreign trade is not a new trend”. Since 2017, the first full year after the Brexit referendum, the UK’s importance has been declining. At that time it was still the fifth most important foreign trade partner.
There were other reasons for Brexit that did not synchronize the British economic engine – for example
- coronavirus epidemic and
- Policy change of the Bank of England.
“The consequences of Brexit add to the impact as customs border trade becomes more expensive,” GTAI says. There is still uncertainty.
Difficulties in trade with England
The UK left the European Union at the end of January 2020 and has also not been a member of the EU customs union and internal market since January 2021. The Brexit trade deal, agreed at the last minute, provides exemptions from customs duties in most areas. However, there are difficulties in trading due to increased bureaucratic requirements. The introduction of expensive and time-consuming work visas for skilled workers also complicates cooperation.
Outlook for development in 2023: Hard times ahead
The 2023 outlook also offers little hope, according to GTAI, especially given that the central bank believes the UK is headed for a prolonged recession and companies may be even more hesitant to invest.
This affects the delivery of vehicles, industrial machinery and chemical products, of which Germany is one of the most important suppliers. The report states:
A few small sectors, which are developing much more strongly despite economic problems, are of particular interest to German companies. These include healthcare, offshore wind power and infrastructure construction.
GTAI is receiving mixed signals from the important automotive industry, the most important pillar of German-British trade. He said that if the British car market really does grow significantly in 2023, it could mean a reversal of the trend. E-cars are a major driver, and the sale of new cars with classic internal combustion engines will be banned from 2030. The question here is whether Great Britain will be able to build enough so-called gigafactories for battery production in time.
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