Brexit: That would be the consequences for German industrial sectors



Great Britain ranks fifth in the list of the most important destinations for German exports – this is one of the reasons why the German economy is so nervously pursuing the Brexit hang-up and finally demands clarity.


A no-deal scenario is still not out of the question – that is, the UK is overthrown by the EU and the Customs Union, without Brussels and London agreeing on an accession agreement that has the backing of both the British and British governments .


But even in this extreme case, the consequences for the German economy would be manageable. This is the conclusion reached by the private economic research and consulting institute Prognos in a current analysis available to SPIEGEL. "A specter of the no-deal Brexit for the German economy is no longer there," says Michael Böhmer, chief economist of Prognos.


Problem Child Pharmaceutical Industry


Among other things, according to Böhmer, this is due to the fact that there is a considerable difference between the mere sum of German exports to Great Britain and the added value actually created in Germany for the United Kingdom business. Thus, German exports to the United Kingdom in 2018 amounted to about 80 billion euros. However, according to Prognos, the real share of domestic value added in 2018 was significantly lower, at 62 billion euros.


This has to do with the fact that German companies also receive intermediate goods from other countries for their export goods. In German cars, for example, numerous components are installed by suppliers based in other countries.


The overview shows that the difference between export sum and actual value added in the sectors with the highest export share to the United Kingdom sometimes varies considerably. In the automotive sector, for example, this difference is almost three percentage points.



Prognos also simulated how abrupt trade barriers would affect the industries involved in a tough Brexit. In such a case, exports to the island could fall within a short space of time, for example by 20 percent, due to the onset of border controls or new tariff barriers, for example. The export minus would thus amount to 16 billion euros.


According to Prognos expert Böhmer, that would be "not nice for the companies, but it would be manageable". After all, the losses in value added are likely to be significantly lower. According to Prognos, they would be "on the order of one percent in most industries". Tougher it would meet only the particularly closely intertwined with the British market German pharmaceutical industry. Here the minus should be at "a good two percent."


The effect on economic growth is likely to be even lower. "German companies would not lapse into lethargy and cry after the British one year," says Böhmer. Instead, it can be assumed that they were quickly looking for other outlets.

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