A Hessen-Agentur study found that the ongoing Brexit negotiations have aroused considerable uncertainty within the Hessian economy.
“The United Kingdom is our fifth-largest trade partner and around 350 British companies have branches or operations in Hessen,” commented Hessen’s Minister of Economic Affairs Tarek Al-Wazir at a joint event hosted by the Ministry of Economic Affairs and Hessen’s Frankfurt-based Chamber of Industry and Commerce. “This means that Hessen is particularly impacted by Brexit. The government of the state of Hessen lends support to companies in making the best of the situation, in minimizing negative effects to the greatest extent possible, and in seizing opportunities that arise in certain areas in connection with Brexit.”
Around 500 companies took part in the “Hessen and Brexit” study, marking the second installment of the study carried out in the previous year under the same name. Half of the companies surveyed conduct business in the United Kingdom. The number of these companies fearing that the UK will strongly or severely distance itself from the EU increased from 16% to 37%.
“It has placed a considerable strain on companies and employees alike that only 10 months prior to the implementation of Brexit they are still in the dark about the impact it will have on them,” explained Professor Dr. Wolfram Wrabetz, Vice President of Hessen’s Chamber of Industry and Commerce. “Although the agreed-upon transition period through the end of 2020 has alleviated some of the pressure, this time frame must be effectively utilized with the aim of quickly negotiating a comprehensive free trade agreement allowing for the preservation of the close UK-EU economic ties currently in place.”
Nearly two-thirds (64%) of the companies surveyed indicated their belief that an abrupt departure from the EU without any treaty or transition period would have an adverse impact on their business. Half of the companies expressed concern about the possible imposition of tariffs, while one quarter expressed fear of being placed at a competitive disadvantage in the event that tax cuts are enacted on the other side of the English Channel.
Brexit could prove to be a blessing in disguise for Hessen, however, if international companies operating from London were to feel a need to establish new branches or operations inside the EU. Minister Al-Wazir has traveled to London four times in the past two years since the Brexit referendum in order to make a case for Hessen. In the financial sector alone, 18 banks have already declared their intent to establish new operations or expand their current activities in Hessen. “Our region offers great potential for successful companies, namely a robust infrastructure, a high standard of living, a vibrant cultural scene, and a pronounced cosmopolitan atmosphere,” explained Al-Wazir. “We need to communicate these perks even more effectively.”
“A number of Hessen-based companies are currently in the process of expanding their operations in the United Kingdom, while other companies have decided to postpone their investment decisions. This serves as evidence of the delicate balance of opportunities and risks surrounding Brexit,” explained the Minister. “We will continue to supply Hessen-based companies with up-to-date and meaningful information and promote their interests in both Berlin and Brussels.”