Are Companies Not Ready For Brexit?

  • Mar 29, 2019 GMT
  • Team Kalkine
Are Companies Not Ready For Brexit?

The British Chambers of Commerce in Germany (BCCG), which includes British companies with the corporate headquarters in Germany and German companies with corporate headquarters in the United Kingdom, has warned that the economic relationship between Britain and Germany will experience a "massive harm" in case of a no-deal Brexit. Moreover, approximately a quarter of its members predict a rise in trade expenses and disruptions, and most will react by shifting business out of the UK to continental Europe.

 According to Michael Schmidt, president of BCCG, the damage to business has already been done, and a no-deal scenario will exacerbate the pain on an economic relationship worth €180 billion. He added that companies, both in the UK and the rest of the EU and especially in Germany, fear massive harm to the business from such a scenario.

A survey of 101 of the chamber's member companies, in association with KPMG, found that a significant 84 per cent of the respondents foresee the British economy declining in 2019, with 47 per cent expecting a sharp decline. However, 47 per cent expects business to grow while 18 per cent anticipates that the business will remain stable. It must be noted that 13 per cent of the respondents were planning to move some or all of their operations out of the country to Germany, a further 10 per cent said they were planning to move operations to another EU member state. In a bleak contrast, no company was planning to move its business to the UK in case of hard Brexit.

Companies ranging from financial services to manufacturing have warned that Brexit will have a substantial impact on their business; 40 per cent of companies surveyed expect a big or even significant impact on their business while 53 per cent expects a small to moderate impact. Only 6 per cent predict no impact at all. According to an earlier survey conducted in 2018, the results were not very different, as 42 per cent expected to be significantly impacted by Brexit. According to companies, administrative costs, sales and service volumes are expected to be hit the most: 47 per cent of respondents predict an impact on sales and their administrative burden.

The survey suggests that 47 per cent of firms with British interests have not even conducted a Brexit risk assessment for their business and, thus, are not ready for the troubles UK leaving the EU could bring. Amongst those who have conducted this assessment, wanted to modify administrative processes and implement a Brexit task force. Moreover, one-third want to build a buffer stock to prepare for the eventual result.

Brexit has overshadowed companies' strategic plans these days, but still almost half of the companies are not ready for it, possibly because a wide range of scenarios is possible. German companies play an essential role in the British economy. It acts as a growth driver for a variety of industries, ranging from pharmaceutical to automotive. German companies invest roughly €118 billion directly in the UK with around 412,000 staff employed. Despite any scenario, the business relations between the UK and continental Europe will remain strong after the UK has left the European Union.

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