Our latest View From Abroad, written with Björn Pauli, a partner at accountancy firm DPHG.
The first reaction was undoubtedly disbelief from everyone - there has seldom been such consensus in my private and professional environment.
Every single person that I spoke with about Brexit before the vote shared my hope: that those supporting Brexit would be in the minority. On that June night in 2016, the whole of Europe held its breath as the results were released.
Every German checked the news before going to sleep, uncertain whether the Europe as we knew it would continue to exist – and we woke up to quite a new reality. The question on everyone’s mind was: “how could the Brits make such a decision?”
One year later, the consequences of Brexit are still ambiguous. Even though the financial markets have settled down after the initial turmoil, further industrial and commercial developments are still unclear. For Germany, Europe’s net exporter, there is a lot at stake - especially for the car and machine building sectors.
Meanwhile, the British economy is stalling. Banks are speculating about shifting operations and/or personnel from London to Frankfurt, whereas EU citizens are fretting over their jobs, fearing that the free movement of people might be abolished. Our perception when talking to clients is that, in uncertain times such as these, German companies are exercising caution when investing in the UK now.
Lead by Germany, the EU has joined forces to protect its institutions and ensure fruitful negotiations on Brexit. According to recent surveys, support for the EU since the referendum is at an all-time high. In this context, the approach that Germany will adopt for negotiations is a source of much speculation.
One option would be to support the UK in quickly reaching an acceptable consensus for both sides, another would be to make a clear statement: leaving the EU was a poor decision for Britain. The advantage of the latter would be to ensure that no other EU country member would follow suit.
No matter which political approach is taken, with the looming elections in September 2017, Brexit is merely one of many points on Angela Merkel’s agenda.
Disappointment and resilience
Overall, most Germans seem to be sceptical about what a ‘successful’ Brexit looks like; the feeling of disappointment has not subdued yet. According to prevailing opinion, the Brits have never been really integrated into the EU. Many Germans still believe that the decision was not thought through, and the consequences are not the EU’s responsibility.
The top priority is to make sure that Brexit, at all costs, does not weaken the EU. It is foreseeable that the united EU will take a tough stance, especially if the UK wants to continue to take advantage of the benefits of the single market.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.