Blogmenü

Brexit won't be easy for German companies, or companies from any other EU countries. A hard Brexit will up that ante many times over. From Cologne, a new study by the German Economic Institute gives some insights and information on what to expect.

British pumpkin
© yurchello108 / Shutterstock.com

Most of the consequences will impact profits of companies, with consumers in Germany perhaps facing higher prices on products as companies react to the shake-up to do business in Europe. According to thelocal.de, the study came as the German government slashed its growth forecasts for 2018 and 2019, blaming "a weaker international trade environment", which has been giving the middle-European export country some causes for alarm. The GDP should expand by 1.8% this year and next year, said the economy ministry in a statement. That's a lower outlook for 2018 of 0.5% and 0.3% for 2019. 

The Hard Brexit

The hard Brexit is an arrangement seen as the UK leaving the EU's customs union and the single market. This agreement would halt countries' abilities to set common external tariffs and halt the single market between the UK and the EU, which allows the free movement of goods, services, money and people in the European Union. At first, this would mean the UK has to revert back to its World Trade Organization (WTO) rules for trade with its former EU partners. 

The report authors had this to say: “The instability and disorientation of the British negotiation position increases the risk of a hard Brexit that would cut off most ties with the EU in a more or less chaotic and sudden manner." They also said that the scenario could cause "considerably higher costs on both sides of the channel".

The British could impose 3.6% tariffs on goods from the rest of the EU, with exports from Germany to the UK falling by as much as 57%. This will hit the German car industry particularly hard. About 60% of the additional costs from the extra tariffs would be incurred in the auto industry, which is one of Germany's biggest exporters, employing more than 800,000 people.

Leaving May Create Boost

Brexit will also end up seeing some companies leave the UK, setting up shop in Germany or some other EU country. That means Germany, and its financial centre Frankfurt, could benefit very well to companies moving to central Europe. 

Nothing Changes

One thing is for certain, Brexit, hard or soft, will disrupt e-commerce businesses. Their supply chains will be disrupted, and tariffs, customs and labour costs will change. Most of these changes won't be for the better once the EU and UK see each other as totally foreign. The source for this article isn't exactly new, which is a bit unorthodox for us, but it proves a significant point. Nothing much changes with Brexit except the deadline; and maybe a Prime Minister or two. Will Boris Johnson prove to be the one to deliver, or will the EU extend the deadline again?