Months if not years before U.K. voters cast the die on their country’s future within the European Union, German companies are beginning to count the cost of a possible exit. Carmakers like BMW AG may have the most to lose.
Meeting Chancellor Angela Merkel for a luncheon in Berlin on Friday at the end of a four-country European tour, Prime Minister David Cameron spelled out the same changes he’s seeking in Britain’s relationship with the EU that he gave to the leaders of The Netherlands, France and Poland. Legislation to allow a U.K. referendum to take place by the end of 2017, following a renegotiation of EU membership terms, was given priority in his government’s program announced Wednesday.
The U.K. is Germany’s most important trade partner in Europe with a surplus of 42 billion euros ($46 billion) in 2014, second only to the U.S., according to the Federal Statistics Office in Wiesbaden. About one-fifth of all cars produced in Europe’s biggest economy, valued at almost 18 billion euros, went to U.K. drivers last year, making the country the top export destination by volume for Germany’s automotive industry since 2001, data from the VDA carmakers’ lobby show.
“The German car industry example underlines the wholly unpredictable, risky consequences for both the British and the German economies of a Brexit,” Joachim Pfeiffer, chief spokesman for economic policy for Merkel’s Christian Democrat-Christian Social Union in parliament, said by phone. “If the U.K. exited it would mean we’ve lost a large, market-orientated, liberal- and like-thinking economy in the heart of Europe.”
A British exit from the EU, commonly nicknamed a “Brexit,” poses questions about whether German companies’ would have a tougher time selling products to the U.K.
Expressing “clear hope” for the U.K. to stay in the union, Merkel said there were areas of “concern” in Cameron’s demands for changes, in comments to reporters following the meeting. Points of contention range from a U.K. veto of EU regulation to a block on welfare payments to immigrants.
“Where there’s a will there’s a way -- that’s what Europe has proved very often,” said Merkel. “We want to proceed according to this principle now.”
It’s not just Germany that stands to lose, according to an April 27 study by the Bertelsmann Foundation. While a U.K. exit may cause German car exports to Britain to contract by about 2 percent in the years to 2030, it may also mean 300 billion euros in lost economic growth by 2030 for the U.K., according to Bertelsmann’s findings.
Access to the EU’s single market of 500 million customers has been crucial to Britain’s small and medium-sized firms, John Cridland, head of the Confederation of British Industry lobby group, said in an opinion piece published on the group’s website on Tuesday.
“It’s beneficial for the U.K. to remain an active and influential member of the EU,” said Peter Schwarzenbauer, the BMW board member responsible for the Mini, Motorcycles and Rolls Royce marques. “The U.K. plays a crucial role in the BMW Group production network and is our fourth-largest market worldwide.”
Britain is home to BMW’s Mini plant in Oxford and Volkswagen AG’s Bentley unit in the northern town of Crewe.
Car parts supplier and engineering company Robert Bosch GmbH has begun to weigh the options for its business of a potential exit by the U.K., which is also the fourth-biggest export destination for German machinery equipment.
“The U.K. is of great importance to the single market,” Uwe Raschke, Bosch’s head of consumer goods, said in an e-mail. “Should the U.K. decide to leave the EU, Bosch would need to study the consequences and adapt to them.”
Germany exported goods and services to the U.K. to the tune of 84.1 billion euros last year, almost double the 42.3 billion euros in goods and services it imported from its partner, according to the statistics office. The U.K.’s trade surplus in financial and insurance services highlights the importance of the City of London to its economy.
Deutsche Bank AG, a stalwart of London’s banking district since 1873 and employer of 9,000 people in the U.K., said it’s studying the potential impact for the firm’s business and is weighing options that may include relocating activities to its home country.
Merkel and the European Commission must “do everything they can to keep Britain” in the EU, said Matthias Wissmann, VDA’s president.