German firms say Brexit makes British market less attractive than Middle East, North Africa

04.05.2018

A new survey shows German managers at small- and medium-sized firms are being turned off the United Kingdom. One man behind the study said the figures indicate "the Brits have given themselves a massive problem."

Small and medium-sized businesses in Germany rate the United Kingdom as the worst foreign market for selling and investing in due to Brexit, according to a new report released on Friday.

The report by the Landesbank Baden-Württemberg (LBBW) and the Institute for Applied Economic Research at the University of Tübingen (IAW) surveyed 370 managers at small- and medium-sized businesses throughout Germany about their views on different foreign markets.

Read more: Prepare for 'very hard Brexit,' German industry group warns

Only 3 percent of respondents said they had a positive view of the UK as a manufacturing location, while more than half said they had a negative view.

Nearly 60 percent of respondents said they had a negative view of the UK's economic trajectory and just under 70 percent said they had a negative view of the country's political situation.

Read more: Poles worried about Brexit

01:15 mins. Business | 08.06.2017 Brexit puts the pinch on UK businesses

'Massive problem' for the Brits

"The UK scores worse than countries in the Middle East and North Africa," LBBW chief Karl Manfred Lochner said during the report's presentation.

Manfred cited the uncertainty aroused by the UK's planned departure from the European Union as the reason for the negative scores. "The Brits have given themselves a massive problem," he said.

Many small- and medium-sized German business, he added, may exit the British market if Brexit occurs as planned in March 2019.

Read more: Brexit Diaries 34: Brace yourself, Theresa May

US political situation not much better

The managers surveyed do not view the political situation in the United States much better than the UK's, with only 8 percent viewing the US positively.

While faring much better than the UK, the US also failed to get high scores for other categories. Some 26 percent of respondents viewed the US negatively as a sales market, while around 35 percent viewed the US unfavorably as a manufacturing location.

Read more: Banks mull Brexit exit from UK

Deal or no deal? Brexit options boiled down Hard or soft options It's essentially a choice of a harder or softer Brexit. Harder prioritizes border control over trade. UK firms would pay tariffs to do business in the EU, and vice versa. The softest Brexit would see access to the single market, or at least a customs union, maintained. That would require concessions — including the payment of a hefty "divorce bill" — to which the UK has provisionally agreed. Deal or no deal? Brexit options boiled down A leap into the unknown Businesses have expressed concern about a "cliff edge" scenario, where Britain leaves the EU with no deal. Even if an agreement is reached at the EU bloc level, the worry is that it could be rejected at the last minute. Each of the 27 remaining countries must ratify the arrangements, and any might reject them. That could mean chaos for businesses and individuals. Deal or no deal? Brexit options boiled down No deal - better than a bad deal? If there is no agreement at all, a fully sovereign UK would be free to strike new trade deals and need not make concessions on the rights of EU citizens living in the UK or pay the financial settlement of outstanding liabilities. However, trade would be crippled. UK citizens in other parts of the EU would be at the mercy of host governments. There would also be a hard EU-UK border in Ireland. Deal or no deal? Brexit options boiled down Divorce-only deal The EU and the UK could reach a deal on Britain's exiting the bloc without an agreement on future relations. This scenario would still be a very hard Brexit, but would at least demonstrate a degree of mutual understanding. Trade agreements would be conducted, on an interim basis, on World Trade Organization rules. Deal or no deal? Brexit options boiled down Limited arrangement, like with Canada Most trade tariffs on exported goods are lifted, except for "sensitive" food items like eggs and poultry. However, exporters would have to show their products are genuinely "made in Britain" so the UK does not become a "back door" for global goods to enter the EU. Services could be hit more. The City of London would lose access to the passporting system its lucrative financial business relies on. Deal or no deal? Brexit options boiled down Bespoke deal: Swiss model Under the Swiss model, the UK would have single market access for goods and services while retaining most aspects of national sovereignty. Switzerland, unlike other members of the European Free Trade Area (EFTA), did not join the European Economic Area (EEA) and was not automatically obliged to adopt freedom of movement. Under a bilateral deal, it agreed to do so but is still dragging its feet. Deal or no deal? Brexit options boiled down The Norway way As part of the European Economic Area, Norway has accepted freedom of movement – something that no Brexit-supporting UK government would be likely to do. Norway still has to obey many EU rules and is obliged to make a financial contribution to the bloc while having no voting rights. Some see this as the worst of both worlds. Deal or no deal? Brexit options boiled down A Turkey-style customs union Turkey is the only major country to have a customs union with the EU, as part of a bilateral agreement. Under such an arrangement, the UK would not be allowed to negotiate trade deals outside the EU, instead having the bloc negotiate on its behalf. Many Brexiteers would be unwilling to accept this. It would, however, help minimize disruption at ports and, crucially, at the Irish border.

1 | 8 Show Caption

Alexander Pearson (with dpa, Reuters)