The Brexit trade deal, implemented on January 1, has not ended the tensions between the UK and the EU over exports and imports. As both parties continue to adjust to the new relationship, the economic impact is being felt in Germany. Joachim Lang of the BDI, the main association of German industry, said in February that “supply-chain problems are hitting German companies very hard”.
He added that this, along with difficulties surrounding COVID-19, will result in a “massive stress-test” for commercial ties between the UK and Europe.
On February 9, the Association of German Chambers of Industry and Commerce said that 60 percent of the 1,200 German companies trading with Britain it surveyed consider their current business situation in Britain to be bad.
Nearly as many expect further deterioration in 2021, and one in six have either already shifted investments away from Britain or are planning to do so.
They argue that the increased bureaucracy has made business in the UK less attractive.
Exports from Germany to the UK fell by almost a third in the first month under post-Brexit trading arrangements, figures released recently revealed.
Germany’s official statistics body said the end of the Brexit transition period was responsible for a 30 percent year-on-year plunge in exports to the UK in January but economists predicted the trade slump will ease.
The plunge in German imports at the start of the UK’s life outside the EU was also worsened by many businesses stockpiling in December as Brexit talks went down to the wire.
Economists are also warning that the UK has already taken a hit.
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The OBR added: “Taking all these factors into account, we now expect the temporary near-term disruption to EU-UK goods trade to reduce GDP by 0.5% in the first quarter of this year.
“This reflects both that exports appear to have been hit harder than imports and that the trade disruption will affect UK supply chains.
“As firms on both sides of the Channel grow accustomed to new trading arrangements, this disruption dissipates, though further disruption is possible when the UK enforces the agreement in full on its side of the border later in the year.”