Long negotiations since mid-2016 which just ended the day before Christmas eve 2020 and far-reaching operational changes for many companies since the start of this year: Brexit has fundamentally changed the basis of trade between continental Europe/the EU and the United Kingdom.
During the last couple of years we repeatedly conducted surveys together with the British Chamber of Commerce in Germany (BCCG) to understand how German companies who are doing business in and with UK are impacted. 100 days after the “go-live” was the time to inquire again:
Many German and British companies underestimated the negative consequences of Brexit. In our survey two thirds admitted that the real impact of Brexit was more negative than thought at the start of the year.
The trade agreement between the EU and the UK agreed just before the end of the year has strongly burdened the exchange of goods and services. 77% of surveyed companies have difficulties importing from Great Britain, 72% in exporting to the United Kingdom.
Managing Partner International Business
KPMG AG Wirtschaftsprüfungsgesellschaft
Supply chains adapted due to Brexit
The new rules have led to drastic consequences for some: 17% of surveyed companies have ceased their export trade with Great Britain altogether. 22% intend to change to suppliers from other countries and a further 13% intend to replace imports using local suppliers.
The revenue of companies surveyed has fallen due to Brexit. In the first quarter, half of the companies sold less than in the prior-year period. Only a few (13%) reported revenue growth and that was also on a limited scale.
Administrative effort adversely affected
"The significant losses in earnings result primarily from additional administrative costs, customs duties and charges as well as higher transport costs", explained Andreas Glunz, Head of International Business. "Owing to the complex regulations and cumbersome formalities, since Brexit one in four companies has also voluntarily accepted paying customs duties that could actually be avoided. That shows strikingly the massive consequences that Brexit has had on companies trading with Great Britain."
The outlook is also disheartening. Potential Brexit benefits, such as lower tax in the United Kingdom or an easier regulatory environment, will not occur or be scarcely significant, in the view of the majority. 51% expect a further reduction in German-British trade.
Clear alarm signal
For this reason Andreas Glunz does not expect an increase in the volume of trade - which has been in decline since 2016: "The implementation of Brexit has led to further sharp declines in revenue and earnings in the first 100 days. At the same time, the trend towards exchange of suppliers in the German-British corridor is continuing, which is likely to lead to further declines in trade. As there is little chance of new opportunities, an improvement is not expected in the medium term."
The BCCG President, Michael Schmidt, views the survey results as a clear alarm signal. "As chamber of commerce, we expected Brexit would lead to severe trade disruptions. However, the current situation goes far beyond that. We are increasingly receiving enquiries from British companies that would like to establish themselves here in order to be able to maintain business relations with Germany. At present, this is clearly the only option for the continuation of mutual - although initially reduced - business relations."
All results of the survey "100 days of Brexit" can be found here.