Brexit and How it Affects Germany

Brexit set to cause upset

Brexit is a term that has been on the lips of just about every European citizen for the past 18 months. The term itself came about as a merging of the words “Britain” and “Exit” following the shock result of the 2016 referendum vote. In June of 2016, over 30 million Brits took to the voting polls to vote to stay with the European Union, or to leave. The results said that 52% of voters opted to leave, while 48% opted to stay.

Many people are still unsure of exactly what the European Union is and why the UK opted to leave. For simplicity purposes, the European Union is a political and economic partnership between the 28 member states, which currently includes the United Kingdom. Officially started after the second World War, the European Union is seen as a single market which allows for goods to be traded across the member states and people to move freely across its boarders.

Why the UK Chose to Leave the EU

Today the EU has its own parliament, a central bank and singular currency that is used by 19 of the 28 member states. Some of the members such as the UK, chose to keep their own currency when joining the EU. As for the reasons why Britain should want to leave the EU; the powers that felt that Britain was being constrained by the so-called red tape of the EU and its restrictions on business. The UK was also in favour of taking back full control of their own borders.

Aside from ceasing to be a member of the EU, there has been much debate about what Brexit would actually mean for the UK, and for other European nations. On the 29th of March 2017, British Prime Minister Theresa May officially triggered Article 50 initiating the Brexit process. This gave the UK a 2-year time limit to conclude exit negotiations. Thus, the UK will officially leave the EU by the 29th of March 2019 in which it can enter a further 21-month transition period.

Hard or Soft Brexit?

With 12 months to go until the UK officially leaves, the talk has turned to whether there will be a “soft” or “hard” Brexit. The terms have come to refer to whether the UK will stick closely to the EU after separation or completely go out on their own. For German citizens currently living in the UK, it has been a nail-biting 12 months on the future of their residency inside the UK.

The uncertainty was eventually lifted in December last year when Theresa May announced that all EU nationals living in the UK would be able to gain “settled status” receiving full rights and protection. This means that every regulation put in place by the UK will apply to Germans who have acquired settled status, whether it pertains to things like tax, entertainment or travel. This means tax brackets may change, the availability of slots online may be reduced, and visas may be required for overseas travel.

The UK government has also agreed that UK nationals living in EU states will be able to stay outside the UK with full protection. When the UK leaves the EU in March next year, EU citizens living outside of the UK will not be able to automatically settle in the country.

What Brexit Means for Germany

Aside from the movement of people, Germany has bigger issues to face. For many years, Germany has been inextricably bound to the UK in all aspects of business. A split from the UK at this point is almost unconceivable and it is causing many furrowed brows among German economists, trade union members, business leaders and industry representatives. The most significant impact of a “hard Brexit” would be felt in the automotive industry.

As it stands, the largest export market in Germany is cars. Of the various countries that Germany exports to, the UK accounts for 15% which is an industry worth around €19 billion. This makes the export of cars to the UK, the most important trade element to date. While the likelihood of hard Brexit is slim, there is still a lot of negotiations to be done.

Aside from the automotive industry, Brexit would have a profound impact on the regulations, logistics and standards of German manufacturing and businesses. It is expected that when the UK leaves the EU, Germany and the UK will be subject to the same customs regulations and duty dates which are seen between the EU and third countries. The difficulty comes in with safety standards and regulation, which could become costly for Germany.

In the long run, the effects of Brexit look set to have a ripple effect, and will cause major changes for both Germans, and Germany.

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