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BREXIT: German firms unconcerned about Brexit

More than nine out of ten German firms do not expect Brexit to have a strong impact on their business in the near future, research has found. 13 Jan 2017

A survey of 2,900 German firms by the Cologne Institute for Economic Research found that only 2% to 3% of firms foresee strong negative consequences for their investment and employment, the institute said.

"The same goes for a potentially negative effect on firms' production processes due to possible problems with intermediate imports from the UK - here too, German firms do not see grave effects," it said.

The results "call into question the view that the German business community would support soft compromises to the benefit of the UK in the upcoming Brexit negotiations", the institute said.

Large companies expect to see more of an impact, both positive and negative; as do manufacturing business compared to services, and companies in the west of Germany compared to those in the east, it said.

Exports to the UK are the area most likely to be affected, but only one tenth of companies expect a serious decline due to Brexit. From 2018, 27% said that British demand may decline and 30% said that a devaluation of the pound will reduce exports. 

A quarter of German firms expect to benefit from diversion of business activities away from the UK, the institute said.

Six out of ten said that they expect a "soft" Brexit, yet see only moderate differences in the effects of a hard or soft exit from the EU, the research found.

"The results of the survey call into question the view brought forward in the British public debate that strong political pressure from the German business community would ensure soft compromises to the benefit of the UK in the upcoming Brexit negotiations. The effects of the Brexit on all firms are too limited for such a conjecture," the institute said.

"While it is true that larger German firms might be more affected, the fear that the EU could disintegrate if the UK obtained an overly generous deal dominates the considerations. Therefore, German businesses will not support any cherry picking by the British government," it said.

Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said: "It’s interesting to note the report’s finding that six out of ten said that they expect a 'soft' Brexit, although only moderate differences were perceived in terms of effects between a hard or soft exit from the EU. The report’s findings would appear to suggest in fact that a soft Brexit may be harder to achieve, given that respondents indicated that German industry considers itself more likely to benefit from a Brexit than to be harmed by it."