The New British Invasion
The number of companies from the UK expanding to Germany hit an all-time record in 2019. GTAI Expert Richard Todd discusses why.
Between 2016 and 2019 a total of 630 companies from the British Isles established new German operations. They include manufacturing plants to R&D facilities to European headquarters to sales offices. This timeframe starts with the country’s decision by referendum on June 23, 2016 to leave the European Union and stops just short of the official farewell on January 31, 2020.
Markets Germany caught up with Germany Trade & Invest’s UK activities coordinator, Mr. Richard Todd, on the latest signals coming out of the UK and how it’s affecting the German economy.
Are British companies following a global investment trend or can you really measure a “Brexit effect”?
Todd: If you look at last year’s figures alone, 185 British companies set up shop in Germany, an increase of ten percent on the previous year. For the first time ever we came out ahead of both China and Switzerland. This was an all-time record for UK companies and put us in second place behind only the USA. This also marked five years in a row that the number of projects from the UK jumped significantly, the only country in the top ten to grow every year.
So you attribute this increase to Brexit?
Todd: Brexit is not the only factor, but an important one for many projects. We have assisted several companies in establishing sales and marketing offices in order to give them a presence in the EU and continued access to key customers and markets.
It is also interesting that a significant number of the larger projects in 2019 were actually expansions of UK subsidiaries that already had a presence in Germany. Repeat business from satisfied customers, so to speak.
Can you give us some examples?
Todd: The largest UK investment project in 2019 was BAP Pharma, which plans to establish a new manufacturing facility with 300 jobs in Bavaria. Brexit and the uncertainty surrounding future access to the European market were key factors that accelerated their decision-making process.
»The UK is the only major economy to deliver more investment projects in Germany every year for five years straight«
Are businesses leaving the UK to come to Germany?
Todd: Not typically, no. They are keeping one foot planted firmly in the UK and expanding to the German market. Beyond concerns over Brexit, German stability and market size are other key factors. Consumer demand in Germany has been high in recent years, the economy has been resilient throughout the COVID-19 crisis, and we are hoping to bounce back as quickly as possible.
What are British companies thinking at the moment about the global pandemic and Brexit?
Todd: Well, there are a few different answers to that question. Obviously thousands of companies are focussed on dealing with the effects of COVID-19 right now. Priority number one is simply to survive. This is especially true for the retail and hospitality industry. And lurking around the corner is the end of the Brexit transition period at the end of 2020, so companies are waiting to see how their business on the Continent will be affected and preparing for all possible scenarios.
What are companies doing to prepare?
Todd: Smart companies are checking their contracts, adjusting their supply chains and assessing risks to their business model as best they can. Waiting and hoping for the best is certainly not a strategy we would recommend. What is most interesting for us is the growing number of companies setting up in Germany as a hedge against risk.
What are the repercussions for the German-British economic relationship?
Todd: The terms of any future UK-EU free trade agreement are vitally important to both economies and still very much uncertain. It would be naïve to think that new trading barriers would not have any economic impact.
That said, some bilateral relationships are growing stronger. To give an example, experts at GTAI and the UK’s Department for International Trade are dovetailing various efforts to create a favourable business climate for companies from both countries.
If you had a crystal ball, where would you see the economic relationship in five years?
Todd: We believe that UK and German businesses will learn to adapt to any new rules that will be introduced. Germany and the UK have such strong ties that we will remain important trade and investment partners in any scenario. Where there is a will, there is a way.