How did the first full financial year go after Brexit was completed on 1 January 2021? What are the expectations for the future in UK business and how are opportunities for new cooperations assessed? Together with the British Chamber of Commerce in Germany (BCCG), we surveyed 69 companies with business ties to the UK on these topics. Our survey took place between December 2021 and the 17th of February 2022. This is the fourth time the annual survey has been conducted.
The results show that the Brexit has had as bad an impact as we feared in last year's study - and the outlook for the future is also bleak:
For more than one in three of the companies surveyed (38 percent), sales revenues have fallen in 2021 due to the Brexit; for 22 percent of the respondents even very strongly. At the same time, as a direct consequence of the Brexit, companies are suffering from significantly increased costs for administration (46% of respondents), logistics (43%), customs and duties (36%), financing (24%) and necessary modifications of their IT-systems (23%).
The view into the future is also characterised by pessimism. More than one in five companies (22 %) expect revenues to decline again in the current year 2022.
Andreas Glunz
Managing Partner International Business
KPMG AG Wirtschaftsprüfungsgesellschaft
Within the EU, Germany is by far the country that paid the highest price for the Brexit and at the same time the country that is among the hardest hit by the economic consequences of Russia's war in Ukraine. In this respect, Germany must also have a great inherent interest in putting economic relations with the UK back on a solid, forward-looking footing. The aim should be an even more integrated Europe including Great Britain, and this for economic as well as security policy reasons. Therefore, a renegotiation of the EU-UK trade agreement must also be on the table now.
Development of the German-British trade volume
The lasting loss of importance of the British market is reflected in the change in trade volume. Whereas before the Brexit every tenth company surveyed generated more than 20% of its global trade volume in the UK, in 2021 this was only 4%. Even within a five-year forecast period, only 6% expect this.
In 2015, the trade volume (exports and imports) between Germany and the UK still amounted to EUR 127 bn. Since then, it has gradually declined to below EUR 100 bn (2021: EUR 97 bn), whereas Germany's overall trade volume increased by more than 20 %. Without Brexit, a German-British trade volume of over EUR 150 bn would have been expected.
Due to the expectation of further declines, the UK is also in danger of losing its place among Germany's top 10 trading partners in 2022.
56% of the companies surveyed expect the British economy to shrink in the next five years. For the EU and Germany, however, only 10 % believe this. At the same time, only about one-third of the respondents expect the British economy to grow in the next five years. For the EU and Germany, on the other hand, 60 to 70 % say this.
Trade flows are increasingly aligning with this post-Brexit "new normal". A quarter of companies have already partially relocated in the last year. Substantially, 6% have relocated from the UK to Germany and 3% to another EU country.
Within the next five years, 15% of respondents plan to relocate from the UK to Germany (previous year: 2%) and another 15% to other EU countries (previous year: 5%). Relocations outside the EU, on the other hand, are planned to a lesser extent (6%) than in the previous year (15%).
Lack of impetus for a new start
With regard to new opportunities, only 4% of those surveyed by KPMG and BCCG consider partnerships in future fields or third markets to be certain or very likely. Cooperations in the area of family businesses are assessed even more critically.
There can be no talk of a new beginning after Brexit. There are no signs of any impetus for cooperation - neither in emerging markets such as Africa, nor on future issues such as sustainability. The family entrepreneurs of both countries have not yet come together either. The upcoming succession planning on both sides of the channel actually provides enough room for this. Politicians should create incentives for cooperation and encourage business associations to cooperate more. Germany as well as the EU cannot afford to leave the UK out.
The less optimistic outlook for the future is also reflected in companies' reduced willingness to invest. At 69 %, the vast majority of German companies have no concrete investment plans for the next three years.
The complete survey results you will find here.
For more in-depth survey results, please contact us. Our expert Andreas Glunz, Managing Partner International Business, will be happy to assist you.
