The withdrawal of the UK from the EU will create new barriers to trade. VDMA is in favour of a customs union with the UK to keep the impact as low as possible. For the mechanical engineering industry, Brexit will not only lead to extra costs and additional bureaucracy, but will also potentially involve new technical barriers to trade caused by regulatory differences. This would impact noticeably on SMEs in particular, warned Thilo Brodtmann, CEO, VDMA. “Even if a free trade agreement were to be concluded between the UK and the EU, which is not currently foreseeable, that would not prevent these added constraints,” he noted. Last year, exports by German companies to the UK had declined by about three percent.
VDMA is in favour of a Customs union with the UK to keep the impact on the industry as low as possible. “Just having a trade agreement between the EU and the UK would be too little on its own, and would be much worse than the status quo. In any case, a trade agreement would imply border controls and Customs clearance, even if both parties were to waive the collection of duties. A Customs union between the EU and the UK would make Brexit a lot less daunting,” said Brodtmann.
Britain’s departure from the EU in March 2019 is already having a negative impact on the mechanical engineering industry. In 2017, mechanical engineering exports from Germany to the UK fell by 2.9% to Euro 7.2 billion. In the process, the UK fell to fifth place, behind Italy, in the list of the largest export markets for the industry in Germany. This downward trend is likely to worsen this year. VDMA attributes that to uncertainty around the unresolved Brexit issues and the marked fall in the value of sterling.