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German-British business community welcomes Brexit negotiations moving to the second phase but concerns remain

8th December 2017

The German-British business community welcomes progress in the Brexit negotiations, which is enabling them to move on to the second phase because only at this second stage will a clearer picture emerge about the nature of the future relationship between the EU and the UK. However, the mood remains cautious, as a no-deal scenario, even by accident, is still a possibility.

Dr Ulrich Hoppe, Director General of the German-British Chamber of Industry & Commerce commented: “Despite the impression created by the media, the first phase of the negotiations, i.e. drawing up the Brexit bill, resolving the question of the rights of EU citizens in the UK and British citizens in the EU as well as agreeing on a framework for the island of Ireland was relatively simple. Over the next nine to twelve months, when both parties need to agree on the future, we will find out that, as always, the devil lies in the detail and many more difficult compromises will have to be made on both sides. Will the Prime Minister be able to sell the compromises to her own party? That remains to be seen – we can only hope that she will have the stamina to do so and to continue to lead Britain through the negotiations, as any change in leadership will create even more upheaval.”

Voicing the ongoing concerns of the German-British business community, Dr Hoppe continued: “However, looking at the political landscape, we might still end up with a no-deal scenario, even if this only happens by accident. This would have disastrous consequences in the short term for both sides, but more so for the UK than for the EU. In the longer term, the UK will of course be able to adjust but, loosely quoting from the Economist, I expect that the UK’s economic prospects will still be good but far smaller than they have been.”

Therefore, despite the current positive news, the German-British Chamber of Industry & Commerce recommends companies continue to include a no-deal scenario in their Brexit strategy. In the short term, they should focus on analysing their value-added chains, logistics and warehousing capacities, as well as tax and customs implications.

Now that the Brexit negotiations have moved to the second phase, the experts at the German-British Chamber hope that planning for no deal will largely be an unnecessary exercise. The hope is that this phase will be concluded with a transition agreement lasting for a number of years so that a final settlement, which works for all, can be negotiated successfully.