The economic uncertainty caused by the U.K.’s referendum on its European Union membership this week will put a lid on Germany’s robust export growth this year, the country’s leading foreign trade group stated Monday.
Earlier predictions that German exports would grow 4.5% in 2016 needed to be revised downwards, Anton F. Börner, president of the Federation of German Wholesale, Foreign Trade and Services, said in Berlin.
“It will be 4.1% minus X,” he said. ” I cannot estimate X for you.” The federation will present a revised estimate later this summer.
A vote for a British exit from the EU, or “Brexit,” on Thursday would be most damaging, Börner said, calling it “the end of the EU as we know it”. It would have a “suction effect”, embolden populist parties across the EU, and damage the region’s economy, he said.
“Brexit leads to insecurity and a loss of trust over the years. This is poison for the economy in the U.K. and in all of Europe,” he said, pointing to the British stock market and the pound Sterling as particularly vulnerable in the immediate aftermath of a Leave vote.
The pound weakened last week as some polls predicted the leave side would win the vote. Tumbling exchange rates against the dollar and euro would continue after a vote to leave, Börner said. “We (in Germany) will also have a loss in growth that you could feel,” he added.
Börner, however, said German and European politicians should–and would–allow the U.K. to retain access to the EU’s single market, even if it votes to leave the bloc.
“Bridges will be built to them,” he said, mentioning Norway’s arrangement.
Leading politicians in Germany and Europe, including recently Finance Minister Wolfgang Schäuble, have warned Britain wouldn’t retain access to the single market if it left the EU and would have to renegotiate this access.
Thilo Brodtmann, managing director of Germany’s influential mechanical engineering association VDMA, also warned on Monday that “for Great Britain to leave the EU would be a setback for Europe as an industry hub… A long period of insecurity would follow a Brexit.”
Three quarters of the machines built in Germany are exported outside of the country, according to the group. The U.K is the fourth most-important foreign market for the sector, with a trade volume of EUR7.2 billion ($8.12 billion) in 2015. According to the group, machine exports to the U.K. fell in the first quarter this year to around EUR1.7 billion, a 4% drop over the same period last year.
Source: MarketWatch
