German Firms Take a Relaxed View of Potential Brexit Impact

  • Nine out of ten firms in survey don’t see ‘strong effects’
  • Only 10% anticipate ‘serious decline’ in exports to U.K.

When it comes to Brexit, German companies appear to be relaxed for now.

More than 90 percent of firms in a survey by the the Cologne Institute for Economic Research don’t see “strong effects” on them from the U.K.’s decision to leave the European Union.

“They are relaxed because they don’t see a large impact on their business,” said Juergen Matthes, head of international economic research at the institute.

In the survey, released on Wednesday in Brussels, only 10 percent of the approximately 2,900 businesses polled said they expected a “serious decline” in exports to the U.K. due to Brexit. “Strikingly, a quarter of German firms rather expect to benefit from diversion of business activities away from the U.K.,” it said.

Matthes said the results indicate that companies are “prepared” for the expected negative effects of Brexit, which include an impact of 0.8 percentage point on exports to Britain this year, according to the institute. Reports showing record-low unemployment and improving business sentiment reinforce the view that the economy may be well placed to ride out many challenges. 

Germany’s economic growth accelerated more than analysts forecast in 2016 to its fastest pace in five years, data released on Thursday showed. German GDP increased 1.9 percent last year after a gain of 1.7 percent in 2015.

The research group estimates that Brexit factors -- in particular the weaker pound and lower forecasts for U.K. economic growth -- will hurt Germany’s economy to the tune of one-quarter percentage point of GDP in 2017, an impact it termed “moderate.”

Firm Focus

British Prime Minister Theresa May said on Monday that the U.K. will need a new trading relationship with the 27 other EU nations after its withdrawal. A day later, Foreign Secretary Boris Johnson said it would be the “height of insanity” to imperil investments in both Germany and Britain that underpin hundreds of thousands of jobs.

The survey indicates that German companies support Chancellor Angela Merkel’s firm focus on maintaining a united EU front against the U.K., even if it risks curbing economic ties. Some advocates of Brexit have counted on Germany to push for compromises with the U.K. to support exports.

“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 U.K. in the upcoming Brexit negotiations,” the Cologne-based research group said.

Before it's here, it's on the Bloomberg Terminal.