German companies are scaling back their investment in Britain ahead of its June 23 referendum on membership of the EU, and German industry is becoming increasingly vocal in warning that a Brexit would hit both nations’ economies.
German foreign direct investment to Britain fell by 6 percent on the quarter to 4.4 billion euros (US$5 billion) in the first three months of this year, Bundesbank data reviewed by Reuters showed.
That followed an already steep annual decline of more than 40 percent last year.
“A British exit means uncertainty for German companies doing business in Britain,” BDI Federation of German Industries managing director Markus Kerber said. “Firms are reacting to this, they are delaying or reducing their investment.”
Reflecting the concerns of German companies and investors ahead of the British referendum, Kerber said a Brexit would lead to severe legal uncertainties for at least the next two years, creating economic risks for both Britain and Germany.
German companies are among the biggest foreign investors in the UK, with 2,500 subsidiaries and about 500,000 British employees in sectors such as financial services, manufacturing, transport, energy and retail, according to German Industry UK, a private organization of about 100 chief executives of companies in Britain with a German majority shareholding.
While German firms generally decline to comment in detail on their investment plans in Britain, there are signs that managers are becoming increasingly concerned ahead of Britain’s referendum.
“From our point of view, it would be advantageous, particularly in terms of wealth and employment if Britain was to stay in the EU,” a Siemens spokesman said.
He said if Britain were to leave the EU, Siemens would not terminate its business activities there. “But a British exit could play a role when it comes to future investment decisions.”
Like many other German companies in Britain, Siemens sent a letter to its 14,000 British employees last month, warning of the risks the firm would face if Britain voted to leave.
“In particular, a new trade deal with the EU could take many years to conclude and it is impossible to predict the terms that will be agreed and at what price,” the Siemens management said. “This uncertainty, and threat of increased costs, could make the UK a less attractive place to do business and may become a factor when Siemens is considering future investment here.”
Companies that have published similar letters or statements include BMW AG, whose British employees make the luxury Rolls-Royce car, as well as chemical company BASF AG and planemaker Airbus Group SE.
A Brexit would not only affect the British economy.
A study by DZ Bank showed it could also cost Germany up to 45 billion euros by the end of next year as exports from Europe’s economic power house would likely be hit, at a time of already waning demand from emerging markets like China.
Last year, German companies exported goods worth about 89 billion euros to Britain, making the UK their third-most important export destination. At the same time, Germany imported British goods worth about 38 billion euros, leaving a trade surplus of about 51 billion euros.
With a total trade volume of 127.5 billion euros, Britain is Germany’s fifth-biggest trading partner behind the US, France, the Netherlands and China. For the UK, Germany is the most important trade partner.
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