A report by international professional services firm Deloitte showed that German companies take the principles of the European Union’s single market quite seriously.
When asked what the EU’s main objective in Brexit negotiations should be, 49 percent of German firms surveyed said completely excluding the UK from the EU single market, if the so-called four freedoms are not assured - the free movement of goods, capital, services and labour.
Another 26 percent of companies said they wanted to maintain the single market with the UK as far as possible, even if that meant giving up the free movement of people. About one quarter said there should be a free trade agreement.
“The United Kingdom’s decision in June 2016 to leave the EU will have a far-reaching economic and political impact,” the report states. “For German companies, Brexit means a fundamental change in the business environment.“
The report in collaboration with ResearchNow surveyed 250 German firms in April from 18 different sectors with revenues of at least €100 million, as well as with trade relationships in the United Kingdom.
If there were to be a hard Brexit, more than a third of firms said they are considering relocating to another EU country. And almost half said they would invest less in the UK.
Most German firms were pessimistic about Brexit negotiations. Nearly 70 percent said they believed the talks would take longer than the designated two years. One in five also said that they didn’t expect any agreement at the end of the two years, and there would be uncontrolled Brexit without transition regulations.
Survey participants were also asked to name the various consequences they could foresee as a result of Britain leaving. More than one-third said Brexit would strengthen populist and protectionist views in the EU, while close to half (46 percent) said there would be further fragmentation and weakening, as well as copycat exits.
For Germany itself, more than half said they expected Brexit to precipitate declining trade between Germany and the British Isles. Another 58 percent said German companies would be reluctant to invest in the UK. And about one in five said there would be a decline in German consumer confidence.
The biggest risks listed by companies were the increased complexity and costs due to different legal and tax regulations.
Nearly 60 percent said they were “working intensively” or “very intensively” on Brexit preparations. For about one-third of companies, this meant establishing new Brexit task forces.
On the bright side, many German companies said that their own country would end up being the clear winner of Brexit, with Frankfurt in particular growing more important as a financial centre. When asked about the greatest opportunities to come out of Brexit, German companies most often said it would be the decreased competition within Europe.
About one third also said it could become more attractive for startups and tech companies in general, especially in Berlin.
The general German population is one of the toughest in Europe when it comes to their stance on Brexit. A survey released last week showed that 80 percent of German respondents said the negotiations should focus on protecting the remaining 27 members of the EU. Just 20 percent said the focus should be on building a new economic relationship with the UK that would give it special privileges.