Brexit is casting its shadow

Foreign direct investment into the UK is down by 90 percent. London should agree to status quo transition from March 2019. First results from BDI Task Force Brexit – duty and quota free trade as minimum requirement.

The Federation of German Industries, the BDI, has called on the UK government to seize the opportunity to make progress in the Brexit negotiations at next week’s European Council meeting. “Our companies need reliable parameters. This meeting presents a chance to work against the uncertainty felt by companies on both sides of the Channel,” said BDI Director General Joachim Lang.

“Brexit is casting its shadow,” warned Lang. Last year the United Kingdom slipped down two places and now only ranks fifth among Germany’s key trading partners. Foreign direct investment flows into the United Kingdom were down by 90 percent over the previous year according to the United Nations Conference on Trade and Development, UNCTAD. “This is an alarm bell that London cannot ignore,” said the BDI Director General. The UK government is meanwhile forecasting GDP growth of only 1.4 percent for this year, the weakest value in the whole EU.

The UK should agree to a status quo transition phase as of 29 March next year. “We call on the EU and the UK government to make this fundamental decision at the upcoming European Council meeting. Otherwise, some companies will have no choice but to launch their contingency plans – for a worst-case scenario that nobody wants and that will harm everyone,” underlined Lang.

Due to the faltering progress achieved in the negotiations so far, companies are having to prepare for the possibility of a hard Brexit. The BDI’s Task Force Brexit has been analysing the problems associated with the UK’s departure from the EU over the past nine months and has presented potential solutions in the areas of trade, market access, transport, tax and financial services.

“For German companies, duty and quota free trade is the minimum requirement, ideally in the framework of a customs union,” said Lang. If the negotiations lead to a free trade agreement, the task force believes it should be based on three tenets: The agreement must rule out duties and quotas without exception, clearly regulate subsidies and provide for regulatory cooperation.