German firms make plans to shift investment from UK

Almost one in ten German companies in the UK plan to respond to Brexit by shifting investments to other EU states even as the terms of the UK’s departure are not yet known, a report has revealed on the eve of the triggering of Article 50.

Around 40 per cent of firms said they expected business to weaken in Britain, according to the survey from the German chambers of commerce, which comes as prime minister Theresa May is due to launch the two-year-long exit procedure tomorrow.

The warning reflects mounting concern about the impact of Brexit on the UK economy and German businesses in Britain.

“Brexit will significantly damage the business of German companies with the UK,” said Erik Schweizer, the DIHK president, adding that exports to Britain were already down 3.5 per cent last year, with most of the decline coming after the June Brexit vote.

“In the coming months we should reckon with further decreases in trade…. In the long term investment will see a sharp weakening in the previous positive trend.”

The DIHK, which surveyed 2200 companies, said that 40 per cent of those polled expected a decline in British business conditions “in the coming months” and 9 per cent wanted to transfer investments, mostly back to Germany, though also to other EU states.

Meanwhile, the VDMA, the machine tool makers’ association, urged Brexit negotiators to avoid the talks ending in collapse.”

That would lead to significant upheavals in bilateral trade,” said VDMA managing director Thilo Brodtmann.

But the VDMA also backed chancellor Angela Merkel’s approach in prioritising the unity of the remaining EU over giving a soft deal to the UK saying “the long-term preservation of the single market is more important for industry than short-term concessions in trade with the UK.”

The business warnings were delivered as Handelsblatt, the business newspaper, reported the German finance ministry was concerned about the possible effects on the possible economic and financial shocks of a hard Brexit.

In a 34-page report, ministry officials warned that “financial stability could be threatened” because British-based banks would no longer be free to offer their services in the remaining EU, said Handelsblatt.

The report argued in favour of a negotiated settlement, though it called for Berlin to take a tough line on the UK’s budget and financial obligations to the EU, said the newspaper. The finance ministry declined to comment.