Samson: 7th September, 2016
UK’s Brexit vote to dampen German economic growth – think-tank
Brexit will shave a third off Germany’s expected economic growth next year, according to a leading Berlin-based think tank.
Ferdinand Fichter, an expert at the German Institute for Economic Research (DIW) in Berlin, said the German economy would grow by only around 1 per cent next year, instead of the 1.4 per cent earlier forecast, largely because of Britain’s 23rd June vote to leave the EU, writes Guy Chazan.
He said the vote had increased global economic uncertainty, which was “toxic for investment activity”.
German companies would, he said, invest less than they were forecast to a few months ago. International trade would also be affected, which will hurt export-oriented countries like Germany.
German companies are already worried about a decline in demand for their goods in the UK, which accounts for 7.5 per cent of Germany’s exports. Almost a third of the cars sold annually in Britain come from Germany, making the UK one of the biggest export destinations for German car producers.
The DIW said the Brexit vote had led to widespread uncertainty among European companies about their future trading relationships with the UK, which will lead to a general reluctance to invest.
“In contrast to a situation where there had been no vote to leave the EU, investment activity in Germany and in the whole eurozone will be significantly impaired,” the report said.
It said economic growth in the eurozone will be 0.1 per cent lower this year as a result of the Brexit vote, and 0.3 per cent less next year.
The vote will have other long-term ripple effects, the report said. Britain is the third largest net contributor to the EU budget so other countries, especially Germany and France, will have to pay more to make up for any shortfall should Britain leave.
Also, the UK is one of the most important recipients of direct investments from the eurozone, so companies might suffer losses if Brexit goes ahead. It also said the costs of financial services could rise if a British departure from the EU restricted access to London as a financial centre.
However, Frankfurt, and the German labour market as a whole, could benefit if banks have to transfer their activities to the continent, “if highly qualified workers, for example from Poland, relocate in greater numbers to Germany,” the DIW said.
https://www.ft.com/content/56f0afca-100d-32f1-b816-7b885fec767a
