BDI: German industry needs clarity on Brexit by next week

German companies have demanded that Britain agrees by next week to an interim phase for its exit from the EU. If no deal is reached at an EU summit, firms must begin planning for a worst-case "hard Brexit."

The Federation of German Industry (BDI) urged British Prime Minister Theresa May and the remaining 27 EU leaders to agree a "status quo" transition period preserving present trade arrangements beyond Britain's departure date of March 29, 2019.

Read more: Brexit cost study: 'Failing to prepare is preparing to fail'

In a statement Tuesday, BDI's managing director Joachim Lang demanded a "basic decision" on Britain's departure from the EU be struck at next week's European Council meeting.

"Otherwise, some companies will be forced to bring their contingency plans into focus for the worst-case scenario, which no one wants and which will damage everyone," Lang said.

Lang also pointed out that negative effects from the approach of Brexit were already apparent, with Britain dropping from second- to fifth-most-important trade partner for Germany last year.

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Deep form of integration

German companies are still preparing for a range of outcomes to the negotiations between Britain and the EU, including the scenario of a hard Brexit in which no agreement was reached.

But the German industry representative said German firms would prefer a deep form of integration between Britain and the EU after Brexit, ideally, Britain staying in the customs union and single market. These options, however, have been rejected by the UK government.

Agreeing a transition period after Britain's formal departure from the EU bloc by next week is tricky, as London and Brussels are at loggerheads over how to organize the border between the Republic of Ireland and British province Northern Ireland.

Britain intends to leave the EU's single market and customs union, which suggests the need for border controls somewhere. The EU text says Northern Ireland must stay in a customs union with the rest of the bloc if no better way is found to avoid a hard Irish border, which is also rejected by Britain.

"As long as the UK doesn't present such a solution, it is very difficult to imagine substantive progress in Brexit negotiations," EU Council President Donald Tusk said last week.

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Predictability sought

Britain's CBI industry body also endorses a customs union with the EU after Brexit, as does opposition Labour party leader Jeremy Corbyn. But British foreign minister Boris Johnson said last week that a hard Brexit and trade with the EU on WTO terms "doesn't hold terrors for me."

BDI chief Lang didn't say what measures German firms' contingency plans would include. But he noted that foreign direct investment flows to Britain had already slowed last year and that German exports to Britain had fallen in 2017.

"Our companies need predictability. Now there is the chance to reduce uncertainty for companies on both sides of the channel," he added.

Read more: EU's Michel Barnier reveals draft Brexit treaty

If a compromise can be found at the Council summit next week, Britain could finally move on from negotiating its terms of exit — mainly concerning its financial obligations, the rights of EU citizens in the UK and UK citizens in Europe, and the post-Brexit relationship including the transition period.

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June 2016: 'The will of the British people'

After a shrill referendum campaign, nearly 52 percent of British voters opted to leave the EU on June 24. Polls had shown a close race before the vote with a slight lead for those favoring remaining in the EU. Conservative British Prime Minister David Cameron, who had campaigned for Britain to stay, acknowledged the 'will of the British people' and resigned the following morning.

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July 2016: 'Brexit means Brexit'

The former Home Secretary Theresa May replaced David Cameron as prime minister on July 11 and promised the country that "Brexit means Brexit." May had quietly supported the remain campaign before the referendum. She did not initially say when her government would trigger Article 50 of the EU treaty to start the two-year talks leading to Britain's formal exit.

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March 2017: 'We already miss you'

May eventually signed a diplomatic letter over six months later on March 29, 2017 to trigger Article 50. Hours later, Britain's ambassador to the EU, Tim Barrow, handed the note to European Council President Donald Tusk. Britain's exit was officially set for March 29, 2019. Tusk ended his brief statement on the decision with: "We already miss you. Thank you and goodbye."

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June 2017: And they're off!

British Brexit Secretary David Davis and the EU's chief negotiator, Michel Barnier, kicked off talks in Brussels on June 19. The first round ended with Britain reluctantly agreeing to follow the EU's timeline for the rest of the negotiations. The timeline splits talks into two phases. The first settles the terms of Britain's exit and the second the terms of the EU-UK relationship post-Brexit.

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July-October 2017: Money, rights, and Ireland

The second round of talks in mid-July began with an unflattering photo of a seemingly unprepared British team. It and subsequent rounds ended with little progress on three phase one issues: How much Britain still needed to pay into the EU budget after it leaves, the post-Brexit rights of EU and British citizens, and whether Britain could keep an open border between Ireland and Northern Ireland.

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November 2017: May pays out?

Progress appeared to have been made after round six in early November with Britain reportedly agreeing to pay up to £50 billion (€57 billion/$68 billion) for the "divorce bill." May had earlier said she was only willing to pay €20 billion, while the EU had calculated some €60 billion euros. Reports of Britain's concession sparked outrage among pro-Brexit politicians and media outlets.

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December 2017: Green light for phase 2

Leaders of the remaining 27 EU members formally agreed that "sufficient progress" had been made to move on to phase 2. Talks will now focus on a transition period and the future trading relationship between the two sides. While the Britain's Theresa May expressed her delight, European Council President Donald Tusk ominously warned that the second stage of talks will be "dramatically difficult."

uhe/aos (Reuters, AFP)