In the Eye of the Hurricane

Interview with Robert Scheid

December 2018

Robert Scheid is the Director of GTAI’s London office, providing market intelligence for German companies and supporting UK-based companies establish a business in Germany. Markets Germany caught up with him about the possible consequences of Brexit.

How does GTAI engage with businesses based in the UK in light of Brexit? 

Our approach is a mix of active and passive engagement. We are happy to help individual companies who contact our London office looking for support, whether they are British companies or from anywhere else in the world, for that matter. Our active outreach consists of events, workshops and seminars, usually in the context of the most important industry trade fairs. Our goal is to inform companies about the ease of doing business in Germany and let them decide for themselves if they should expand to Germany. We are not targeting specific companies with the aim of luring them away because of Brexit. 

Has there been an impact on the daily work at the GTAI London office since the Brexit vote? 

The volume of work has increased significantly. We have a larger number of inquiries from companies who are weighing their options. We have seen an increased number of political and business delegations from Germany who want to understand the situation up close. And we also provide information for German exporters that are eager to cut through the noise surrounding Brexit and know how certain sectors could be affected.

As for the content, we haven’t changed our focus. When we speak with foreign companies, we are informing them of the conditions in Germany, which are stable. When we inform German companies about the UK market, we try to identify and anticipate risks and opportunities, so with Brexit we just have to stay on our toes and pay close attention to developments.

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Have you noticed a change in the number of companies or in the types of enquiries as the Brexit developments progress? 

Yes, we have seen an uptick of more than 54 percent over the past year in the number of enquiries coming from the UK. And in our international ranking of the most requests and investment projects, the UK has moved from ranking fourth to ranking second overall since the Brexit vote. Nearly all of these companies cite Brexit as a reason for considering an investment in Germany.

And when our industry experts travel the world attending trade fairs and meeting with companies, they say that the interest could be even greater, but many are just waiting to see how the final Brexit deal will look before they make concrete plans to shift resources or relocate.

The types of enquiries have not changed dramatically. For example, the same sectors that have always led the way for investment projects – financial services, IT and software – continue to rank at the top.

What are companies’ main concerns for their European operations around Brexit? 

At the moment, the biggest factor weighing on businesses is uncertainty. Several companies located here – German, British, North American and Asian firms – say the worst part is not knowing what to prepare for. They say even a so-called Hard Brexit would not be ideal, but it would be manageable if they could begin preparations well in advance. Right now most companies are in a holding pattern, waiting for a final arrangement before deciding how to adjust. Only the largest international corporations have invested in full Brexit preparations.

More concretely, companies are worried about everything ranging from changes in customs rules, certifications and labeling of products, recruiting personnel from outside the UK, chemical and medical device regulations, passporting for financial institutions, supplier contracts, logistics and warehousing, rules of origin for complex manufactured products that pass back and forth across the English Channel several times during production, and a host of other concerns. There are many more question marks than answers at the moment.

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What advantages does Germany have for businesses operating in the EU compared to other EU countries and cities?

Germany is the largest market in Europe and is at the center of the continent, so quite easy to reach all other European markets. We’re known for exporting, so companies benefit from things like a great infrastructure and efficient logistics. We have a solid legal system, competitive tax rates, a high quality of life and surprisingly low cost of living compared major metropolises like London or Tokyo. We are also internationally-minded and open. Most Germans speak fluent English and many speak multiple foreign languages.

How would the strength of Germany’s business environment change after Brexit compared with now?

One of the key strengths of Germany’s business environment is its stability. Germans don’t like incalculable risks, so the country has created a stable business environment for themselves which also benefits foreign companies here. This will not change in relation to Brexit.

What could change is that international companies often choose the UK as a gateway to the entire European market. Depending on the results of Brexit, we could see more companies looking elsewhere for their European headquarters. And Germany is the largest market at the heart of Europe, so we would be a strong candidate for many businesses.

In terms of trade we are also expecting a slight shift in supply chains, which could affect international trade statistics. Germany’s trade relationships are intertwined with the rest of Europe, so we don’t expect any major shocks, but we are preparing for some potential adjustments.

But let me be clear: we don’t expect and we don’t want to see a mass exodus of companies from the UK towards Germany. We hope for the smoothest deal possible that allows us to maintain strong economic ties between Germany, the UK and the rest of Europe. London will remain a key metropolis and financial center and the UK will still be one of our most important trading partners no matter what form Brexit takes on.

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