German exports to UK fell almost a third in January as Brexit hit

By Paul Carrel and Rene Wagner

BERLIN (Reuters) – German exports to the United Kingdom fell by 30% on the year in January as the impact of Brexit turned Europe’s largest economy away from the UK, exacerbating the hit to business from the coronavirus pandemic, official figures showed on Tuesday.

The UK left the European Union’s single market at the end of last year, raising barriers to trade. That final split followed more than four years of wrangling over its terms of exit from the EU, during which German businesses had already begun to reduce their interactions with Britain.

“Since 2016 – the year of the Brexit referendum – German exports to the UK have steadily declined,” Germany’s Federal Statistics Office said in a comment on the preliminary figures. It did not give a sector-by-sector breakdown.

The Office attributed the January slump to “the effects of Brexit after the year 2020, which was marked by the Corona pandemic.”

The impact of COVID-19 meant that the UK economy was smaller in January than a year earlier. The International Monetary Fund estimates that the UK and euro zone economies will not return to their pre-pandemic levels until next year.

Ahead of formal departure from the EU on Dec. 31, British businesses rushed to bring goods into the country – stockpiling that often results in a dip in activity later.

The January slump in bilateral trade compared with a more modest decline in December 2020, when German exports to the UK fell by 3.3% on the year, to 5.0 billion euros, and imports from the UK dropped 11.4% to 2.8 billion euros.

Gabriel Felbermayr, president of the IfW economic institute in Kiel, said the January export slump was probably an “outlier” as the pandemic slowed trade, and as exporters adjusted to new customs formalities.

“In the long term, we assume that German exports to the UK will be 10% below the level expected without Brexit,” Felbermayr told Reuters.

The Brexit deal is “far removed from the rules of the single market” in the EU and will dampen trade, he added, with many firms on the continent having already reorganised supply chains and scaled back business with Britain.

NEW RULES

New customs rules which took effect in January have increased the cost and complexity of trade between Britain and the EU, especially for smaller firms, and caused delays to freight at the borders.

In 2020 as a whole, German exports to the UK fell by 15.5% compared to 2019, recording the biggest year-on-year decline since the financial and economic crisis in 2009, when they fell by 17.0%, the Office said.

In 2015 German exports to the UK amounted to 89.0 billion euros. In 2020, German they totalled 66.9 billion euros.

Imports to Germany from the UK totalled 34.7 billion euros in 2020, down 9.6 % compared to 2019.

(Reporting by Paul Carrel; Editing by Madeline Chambers and Catherine Evans)