Prime Minister Boris Johnson secured a trade deal with the EU, easing fears on both sides of the English Channel that had been sparked by a possible no deal scenario. But, even with leaders across Europe expressing relief and optimism, Brexit appears to have already impacted the German economy. Professor John Ryan, a Network Research Fellow at CESifo, highlighted this as he examined the decline in Berlin-London trade in the aftermath of the 2016 referendum, in which the UK voted to leave the EU.
In his article for the London School of Economics, Professor Ryan noted that “Brexit has already significantly damaged the overall German economy”.
In 2015, German exports to the UK stood at around £80billion, making Britain Germany’s third-biggest customer.
But this figure had fallen to just over £70billion by 2019, and by 2020 the UK was ranked as Germany’s fifth-biggest customer.
Germany was able to soften the blow by increasing exports to other European countries, but Professor Ryan added in his April 2020 article that previous German predictions of an economy boost hadn’t quite materialised.
In 2017, it had been predicted that Brexit would lead to more financial sector work in Frankfurt while London would lose 10,00 finance jobs.
In Frankfurt alone, the additional annual tax receipts were predicted to be towards £165million.
But Frankfurt’s growth was a fraction of this, as Europe’s finance capital added just 1500 jobs by 2020, one-sixth of the prediction back in 2017.
Professor Ryan concluded that “Germany’s financial sector’s long-propagated ray of hope has proven to be a deception.”
As Germany prepares for an economic hit, the UK Government’s forecasts also predict a decline.
The Government predicted last January that Prime Minister Boris Johnson’s deal would reduce annual economic growth by 6.7percent compared to staying in the EU.
The National Institute of Economic and Social Research, one of the leading think tanks in the country, warned in October 2019 that Brexit could cost the UK economy as much as £70billon over the next decade.
Throughout Brexit talks, the German automotive industry was branded a potential weakness for the EU.
Many companies in Europe feared the consequences of a no deal scenario, including BMW.
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They said earlier this year: “Uncertainty is not good for business… we must therefore continue to prepare for the worst-case scenario, which is what a no deal Brexit would represent.
“We strongly urge all relevant stakeholders to do everything possible in order to establish much-needed certainty for our business and to maintain the truly frictionless trade on which our international production network is based.”
More German cars are exported to the UK than any other country – about one in seven cars made in Germany are sold in Britain.
Felix Schoenherr of Werte Union – a group within the Christian Democratic Union that has previously criticised Mrs Merkel – told Express.co.uk of how the German car industry wants to hold on to British trade.
He said in March: “It’s mainly exports, of course, the UK is an important market, so we are dependent on that trade relationship as well as our trade with the US, also to China. So this is an issue.
“I think from a German economic perspective the UK is a very important trade partner, and we should try to get an agreement on both sides.”