A possible Brexit unsettles German companies

Two thirds of companies are unable to predict the consequences. Only one in four are prepared for a Brexit.

A possible Brexit and its consequences are generating great uncertainty among German companies, according to a joint study conducted by the Federation of German Industries (BDI) and Deloitte on Wednesday in Berlin. Two thirds (64 percent) of those surveyed stated that they were unable to predict the impact of a Brexit on their own company. Furthermore, 30 percent expect to see negative consequences for their business.    

“The German industry’s uncertainty regarding future business relations with the United Kingdom is tangible,” said Markus Kerber, Director General of the BDI. “To avoid such uncertainty in the future, all of us on the Continent need to ask ourselves the same questions as the British about the relationship between central political power in Brussels and continued decision-making sovereignty at the national level.”    

The reported uncertainty can be broken down into a series of more detailed findings: 71 percent of the surveyed companies fear greater uncertainty on the financial markets and 60 percent fear increasedvolatility in capital markets and exchange rates until the new terms of the relationship between the United Kingdom and the EU are agreed. Almost half the companies surveyed (46 percent) think it likely that direct investments from the island to Continental Europe would be rerouted. But a similarly high proportion (43 percent) also expect higher tariffs for German exporters.

“Almost half the companies fear that a Brexit will lead to greater complexity and higher costs,” said Alexander Börsch, chief economist at Deloitte. “Astonishingly, only 29 percent of the businesses surveyed – primarily from the finance sector – have made preparations for this outcome. Companies from all potentially affected sectors should be preparing themselves for the possible scenarios ahead so that they can manage the consequences for their own business: Decreased export opportunities, new risks and a review of value chains and strategic investments are just some of the possible challenges that a Brexit would present for companies.”

The joint BDI and Deloitte study was conducted from 17 to 19 May 2016. A total of 215 companies were surveyed whose businesses would be directly affected by a Brexit. Over half of the surveyed companies export goods to the United Kingdom or have a branch there. The remaining companies rely on imports from or production in the UK. Three quarters (74 percent) of the companies surveyed generate sales of at least 500 million to 15 billion euros.

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