How much has Brexit cost so far

Brexit and the German economy

From January 1st, things are likely to be uncomfortable and expensive for German companies trading with Great Britain. Then the so-called hard Brexit threatens - the island's departure from the EU, after which only the general rules of the World Trade Organization would apply to the exchange of goods. But that had actually developed very well during the times of the EU membership of the United Kingdom. As a result, there is a lot at stake.

If you summarize all trade, as the Prognos Institute did for a study last year, Germany imports goods and services worth 115 billion euros from the island. Great Britain is a heavyweight as a trading partner for Germany, as the IW Halle describes it. In terms of exports, it ranks fifth among trading partners in the German trade in goods and eleventh place among imports.

"In total, 460,000 jobs are directly and indirectly behind German exports to the island," says Gabriel Felbermayr, head of the Kiel Institute for the World Economy (IfW). In a hard Brexit, he estimates, "a quarter of these jobs would be at risk".

"The trade has already decreased"

In 2015, i.e. in the year before the Brexit referendum in Great Britain, the island took third place for the most important export countries and ninth place for imports. The long period of uncertainty and tough negotiations between London and Brussels has not only cost a lot of trust - the tangible costs of the exit are already considerable: "Trade with the United Kingdom has already decreased significantly in recent years," said Felbermayr .

The experts at the Destatis statistical office also see it this way: "The trend of declining German trade in goods with the United Kingdom since the Brexit referendum is continuing." In the first half of 2019 alone, the decline was 4.6 percent for exports and 3.7 percent for imports.

On closer inspection, it becomes clear which sectors have been particularly important in British-German trade up to now and which are now particularly affected. The much-invoked fish is not one of the major problems for Germany.

Loser auto industry

As is so often the case, the front runner here is the automotive industry: Around a quarter of the exchange of goods between the two sides has to do with cars. The decline is particularly striking here; In the first half of last year alone, it exceeded nine percent for both exports and imports. The minus compared to 2015 is at least 22.7 percent, according to Destatis. With a view to the near future, the fund company Blackrock predicted last year: "The German automotive industry is the biggest potential loser."

Brexit loser in the car industry

The chemical industry, the second big chunk in bilateral trade between Great Britain and Germany, has also been hit hard. Between 2015 and 2019, exports fell by 10.4 percent and imports by 1.7 percent.

The automotive and chemical industries are each closely interlinked in production across borders. For the experts at Destatis, the figures here indicate that "the supply chains are already being dismantled, which is likely to damage the UK in particular". It is assumed that Germany will find it much easier to use alternative delivery routes within the EU than the island economy after a hard Brexit.

Price effects

How diverse the picture and how different the factors shape it becomes clear in the pharmaceutical industry, which is also a heavyweight in bilateral trade. Between 2015 and 2019, the value of imports increased by a good 65 percent, but the value of exports fell by around 46 percent. The amount traded changed only slightly; Price effects played a decisive role here. The British pound has depreciated sharply in recent times - a side effect of the Brexit streak, so to speak - which has made British products cheaper in this country. Conversely, imports on the island are expensive. The credit agency Euler Hermes suspects that imports in Great Britain could soon see price increases of 15 percent and that the pound will continue to depreciate sharply.

Price effects on the pharmaceutical market

Measured against such possible distortions, German managers are surprisingly calm. Last year, only around 25 percent of medium-sized companies, which play a decisive role in German exports, feared a hard Brexit would have "rather negative" or "very negative" effects. Around 60 percent of those surveyed by the KfW Group did not expect any major effects.

"A question of security"

Economists see it very differently. The threatened break with Britain "could dampen German gross domestic product by several tenths of a percentage point in the one to two years after a hard Brexit," predicts the IW Halle. And IfW boss Felbermayr said that Frankfurter Rundschau This week, he assumes "that a hard Brexit - with high barriers on both sides - could cost the German economy around 20 billion euros in disposable income every year in the long term".

Brexit security problem (Boris Johnson, Emmanuel Macron, Angela Merkel - archive image)

However, this already includes higher German payments to the EU. Political decision-makers in Berlin should book this as a sensible investment - in the unity of Europe, which could be significantly damaged by Brexit. A British observer recently stated that "from a Berlin perspective it would be dangerous and self-destructive to agree to a Brexit deal that undermines the common market," Gideon Rachman said in the Financial Times. Defending the common market is not just an economic matter, "it is a question of security".

Because, as the Briton quoted an unnamed government representative from Berlin as justification: "What Moscow, Beijing and Washington have in common is that they would all like to tear Europe apart."