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The following guest post is courtesy of freelance writer Zak Goldberg.
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Brexit is one of the biggest topics in the global financial communities, and this is even in a time where other hugely significant things like President Trump’s early days in power are going on. Whether you were for or against Brexit, the fact certainly still remains that it will bring us into uncharted territory as a trading partner. A lot has changed since the days before Britain joined the EU, so even looking at those for reference doesn’t provide much help about what to expect – after all, that was before the euro existed as a currency, and of course, before the internet revolution!
Trading with Key EU Partners
What we instead have to do is look at what we will need to be able to arrange in terms of strong trade agreements once Article 50 is raised and the UK becomes a separate entity. Naturally, there are certain EU countries that have more important relationships with the UK from a business perspective than others, however the EU will need to be negotiated with as a collection of countries, and so it won’t be that the UK will be able to arrange different deals with trading partners that seem very desirable to us to trade effectively with, like Germany and France, than with those we may do fairly little business with but who still are under the EU banner. This is important, because Germany – not a country perceived to be at risk of leaving the EU any time soon – is one of the UK’s biggest trading partners, and is also faring very well at the moment in terms of trade.
Why Is Germany Performing Well?
There are several ideas analysts are putting forward as to why Germany is experiencing a trade boom at the moment. One is that Brexit actually gives the opportunity for Germany to take some of the financial clout in Europe that was previously enjoyed by London. Frankfurt is a major financial hub, and while many in the banking and economics communities are suggesting that Europe’s future structure in these sectors will not involve uprooting London financial businesses and simply establishing a new centre somewhere else, those who think Europe will need a ‘new London’ for banking and financial services are touting Frankfurt as one of the best candidates (along with other key cities like Amsterdam).
The German Immigrant Entrepreneur Boom
Germany has also been performing very well in terms of rejuvenating its start-up and entrepreneurial culture, and this is being largely attributed to its immigrants. Reports have shown that since 2014, where Germany has made itself open to lots of Middle Eastern refugees and immigrants, it has experienced a massive boom in new businesses owned by non-German passport holders. People from countries like Syria who have arrived in Germany have found lots of ways to support themselves, and for many that has meant starting a new enterprise rather than seeking a job. This has been seen as very positive for the German economy and business culture.
People have often stated that the fact Brexit will make it harder for people to migrate to the UK will mean there will not only be no chance of us enjoying similar benefits, but also spark a ‘brain drain’. However, it is worth noting that the immigrants in Germany in question did not arrive as EU citizens under free movement of people and services policies EU countries observe, so actually, whether or not it is easier or harder for people from outside of Europe to come to the UK after Article 50 than it was as a member state shouldn’t actually be a direct result of Brexit. Of course, what policies are implemented after Brexit will remain to be seen, so it is hard to know which way things will go in terms of immigration, and this understandably makes economists err on the side of caution.
The difficulty when trying to guess what might happen to the relationship between Britain and Germany after Brexit really comes down to the fact that commercially, these are countries that trade well together and have both emerged as highly significant European economies, however there is also the matter of diplomacy. Germany and Britain want to work together, however any deals that look too beneficial to Britain may incite other countries to believe leaving the EU can mean good deals with stronger EU economies too.
It will be a difficult dance as terms that work for all parties can be established without this being a problem, however with Germany’s economic clout it is probably unlikely they will be willing to ‘cut off their nose to spite their face’ and punish Britain with harsh EU trade conditions.