VDMA
Brexit will hit SMEs particularly hard
Brexit will not only lead to additional costs and bureaucracy in the mechanical engineering sector, there is also the threat of new technical barriers to trade due to different regulations. This would have a particularly noticeable impact on medium-sized companies, warns VDMA Managing Director Thilo Brodtmann.
"Even the conclusion of a free trade agreement between the EU and the UK, which is not yet foreseeable, would not prevent these additional burdens," says Brodtmann. German companies' exports to the UK already fell by around 3 percent last year.
"Cooperation on a voluntary basis cannot replace a single market. If there are two separate legal systems in the EU and the UK, they will diverge over time," explains the VDMA Managing Director.
"For machine manufacturers, trade with the UK will be more expensive and more complex if different technical specifications apply there than in the EU. Even a trade agreement will not be able to prevent this completely, because the EU has little room for compromise. In the end, preserving the single market is more important than making concessions to the UK."
Border controls even without customs duties
The VDMA is campaigning for a customs union with the UK in order to minimize the damage to the industry. "A mere trade agreement between the EU and the UK is actually too little and would mean a significant deterioration compared to the status quo," says Brodtmann. "A trade agreement would mean border controls and customs clearance in any case, even if both sides waive customs duties. A customs union between the EU and the UK would take a lot of the horror out of Brexit."
The UK's exit from the EU in March 2019 is already having a negative impact on the mechanical engineering sector. In 2017, exports by mechanical engineering companies from Germany to the UK fell by 2.9% to 7.2 billion euros. In the list of the largest export markets for German mechanical engineering, the UK slipped to fifth place behind Italy in 2017. This downward trend is likely to accelerate in the current year. According to the VDMA, the reasons for this are the uncertainty caused by the unresolved Brexit and the significant devaluation of the British pound. am
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