German companies have demanded that Britain agrees by next week to an interim phase for its exit from the EU. If no deal is reached at an EU summit, firms must begin planning for a worst-case “hard Brexit.”The Federation of German Industry (BDI) urged British Prime Minister Theresa May and the remaining 27 EU leaders to agree a “status quo” transition period preserving present trade arrangements beyond Britain’s departure date of March 29, 2019.
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In a statement Tuesday, BDI’s managing director Joachim Lang demanded a “basic decision” on Britain’s departure from the EU be struck at next week’s European Council meeting.
“Otherwise, some companies will be forced to bring their contingency plans into focus for the worst-case scenario, which no one wants and which will damage everyone,” Lang said.
Lang also pointed out that negative effects from the approach of Brexit were already apparent, with Britain dropping from second- to fifth-most-important trade partner for Germany last year.
Deep form of integration
German companies are still preparing for a range of outcomes to the negotiations between Britain and the EU, including the scenario of a hard Brexit in which no agreement was reached.
But the German industry representative said German firms would prefer a deep form of integration between Britain and the EU after Brexit, ideally, Britain staying in the customs union and single market. These options, however, have been rejected by the UK government.
Agreeing a transition period after Britain’s formal departure from the EU bloc by next week is tricky, as London and Brussels are at loggerheads over how to organize the border between the Republic of Ireland and British province Northern Ireland.
Britain intends to leave the EU’s single market and customs union, which suggests the need for border controls somewhere. The EU text says Northern Ireland must stay in a customs union with the rest of the bloc if no better way is found to avoid a hard Irish border, which is also rejected by Britain.
“As long as the UK doesn’t present such a solution, it is very difficult to imagine substantive progress in Brexit negotiations,” EU Council President Donald Tusk said last week.
Britain’s CBI industry body also endorses a customs union with the EU after Brexit, as does opposition Labour party leader Jeremy Corbyn. But British foreign minister Boris Johnson said last week that a hard Brexit and trade with the EU on WTO terms “doesn’t hold terrors for me.”
BDI chief Lang didn’t say what measures German firms’ contingency plans would include. But he noted that foreign direct investment flows to Britain had already slowed last year and that German exports to Britain had fallen in 2017.
“Our companies need predictability. Now there is the chance to reduce uncertainty for companies on both sides of the channel,” he added.
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If a compromise can be found at the Council summit next week, Britain could finally move on from negotiating its terms of exit — mainly concerning its financial obligations, the rights of EU citizens in the UK and UK citizens in Europe, and the post-Brexit relationship including the transition period.
uhe/aos (Reuters, AFP)