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Echoes Throughout Europe – The Impact of Brexit on Germany
Global Banking & Finance Review®
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By Stewart Beer, Site Manager at Electrix International.
When the UK voted to leave the European Union in 2016, it saw economic repercussions almost instantly. As the results from around the UK flooded in, the value of the pound suffered its biggest single-day slump in 31 years. This meant it was down over 7% against the Euro.
The result of the referendum has greatly impacted the relationship between the UK and countries within the European Union. One of the countries that has seen the greatest change in their UK relationship is Germany.
In this article, we’ll explore how Brexit has affected Germany.
One of the biggest hits Germany has taken as a result of Brexit has been the change in trading. Prior to the Brexit vote, the trading relationship between Germany and the UK was very strong. In 2015, German exports into the UK were operating at over €89 billion in 2015 but fell under €79 billion in 2019.
Imports of products and goods from the UK also suffered thanks to the additional costs and rules of EU-UK trading. Destatis, Germany’s statistical office, reported that imports dropped to €32 billion in 2021. This is an overall drop of 8.5% from the previous year and saw the UK lose its status as one of the top five largest trade partners for Germany. The London School of Economics has predicted that trade with EU countries could decrease by around a third over the next 10 years.
Germany responded to this change in trading relationships with the UK by looking to trading partners within the EU and further afield. There was a rise of 16.8% in exports from Germany to other EU countries and a 20.8% increase in exports to China. Overall, there was a wave of goods imports into Germany that resulted in a 17.1% rise to €1.2 trillion in 2021. Turning to neighbouring countries for things like car parts and stainless steel enclosures helped to maintain their aerospace industry.
When the Brexit plan was initiated on 31st January 2020, the UK surrendered its involvement in the freedom of movement within the EU. This means that UK citizens travelling into Germany don’t require a visa so long as their stay isn’t longer than 90 days, and within that time, they don’t have access to economic activity such as getting a job. This could discourage British citizens from taking opportunities to work and live in Germany and vice versa.
With the events of the last few years and the changes to travel for British citizens, the tourist arrivals in Germany have taken a huge hit. Between 2019 and 2022, the intake of tourists into the country has decreased by well over half. The impact of COVID can obviously be seen in these results but the uncertainty surrounding travel as a result of Brexit can’t be understated.
One group this has a particular impact on is young people. Having the option for free movement and the opportunity to work and live in a different country and immerse yourself in the local culture helps in finding yourself. This was made even more difficult when the UK then made the decision to withdraw from the Erasmus+ scheme. This offered grants to help fund international studying for those who wouldn’t be able to afford it otherwise.
Britain’s exit from the European Union has a huge economic impact on the remaining countries. An analysis by the European Commission in 2021 estimated that as a result of this event, Germany could be set to lose €35 billion.
While part of the EU, the UK was the second-largest contributor to the EU’s budget. In the last full year as part of it, the UK contributed a gross of around £18.9 billion to the EU before being rebated £4.5 billion. As a result, the expectation falls on the remaining countries to pick up the pieces, and that task falls to Germany as the next largest contributor, with a reported €28 billion given to the budget in 2020. Combining Brexit with the impact of other world events from the past few years has seen the German government act.
The council of economic advisers brought their forecast for economic growth for 2022 from 4.6% down to 1.8%. This is to account for the increase in natural gas and oil prices, as well as the already delayed supply chains struggling further. However, they do expect the country’s GDP to see an increase of 3.6% in 2023.
The overall effects of Brexit didn’t just echo throughout the UK. The stark impact it had on countries throughout the EU can’t be understated, particularly in Germany. Trade and travel have taken a huge hit from the change, losing a lot of revenue from these streams. With the UK leaving the EU, a lot of responsibility in terms of the Union’s budget has fallen to Germany as the next largest contributor. Combining an increase in responsibilities budget-wise alongside maintaining the country’s individual economy has meant a reduction in their expected growth. However, with neighbouring European countries and China upping their trading with Germany, we’ve seen an impressive turnover which leaves us positive and hopeful for a prosperous future.
https://www.theguardian.com/world/2022/feb/09/uk-goods-into-germany-down-further-sign-brexit-damage
https://www.bbc.co.uk/news/56347096
https://uk.diplo.de/uk-en/travel-after-brexit/2441830
https://commonslibrary.parliament.uk/research-briefings/cbp-7886/
https://www.statista.com/statistics/316691/eu-budget-contributions-by-country/
Brexit refers to the United Kingdom's decision to leave the European Union, which was finalized in January 2020 after a referendum held in June 2016.
Economic growth is an increase in the production of goods and services in an economy over a period of time, typically measured by GDP.
Tourism is the activity of traveling to different places for leisure, business, or other purposes, contributing significantly to many countries' economies.
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