Dhe economic importance of the United Kingdom for German foreign trade is steadily declining three years after Brexit. In 2022, for the first time in recent history, the country slipped out of the ranking of the ten most important German trading partners due to the consequences of the EU exit and the poor situation of the British car industry. This is the result of an analysis of data from the Federal Statistical Office by the federal company Germany Trade and Invest (GTAI), which is available to the German Press Agency. Experts had already expected this development in late autumn 2022.
The bilateral exchange of goods increased nominally by 14.1 percent compared to the previous year, to 111 million euros. However, German trade with the Czech Republic grew by 16.4 percent to 112.9 million euros – the neighboring country pushed the British out of tenth place. Before the Brexit referendum in 2016, the United Kingdom was still fifth in the ranking of German trading partners. Since 2018, the country has been sinking steadily.
Many reasons for the decline
Great Britain left the EU at the end of January 2020 and has also not been a member of the EU customs union and internal market since January 2021. Despite a last-minute agreement, new tariffs and cumbersome bureaucracy have hampered trade between the UK and the EU in many sectors.
“The slump has many reasons,” said GTAI. “Brexit is thus slowing down trade development on numerous levels. And the weak development of commercial investments since the 2016 referendum is hampering demand for industrial goods from Germany.” The economic policy course is still unclear, and the severe government crisis with three prime ministers within a year has made recovery more difficult, stressed GTAI. The economic pre-corona level from 2019 has still not been exceeded.
In 2022, for example, exports of industrial machinery, one of the most important export goods, to Great Britain grew at a below-average rate. “German exports of automotive parts were particularly weak.” This was due to the fact that British automobile production experienced the weakest production year since 1992 due to the consequences of the pandemic and ongoing supply bottlenecks. The car industry is an important pillar in German-British foreign trade.
“There is no trend reversal in sight,” the experts judged, referring to the most recent forecast by the International Monetary Fund (IMF). Accordingly, the British economy will shrink by 0.6 percent in 2023. In addition, other British projects such as the abolition of numerous remaining EU laws threatened British-European trade. In addition, there are existing problems caused by disputes about special Brexit rules for Northern Ireland or the posting of employees to the United Kingdom, which inhibits the expansion of locations. “Even the gradual introduction of customs controls is not yet complete on the British side,” GTAI warned.