The German Mittelstand
German SMEs: no misgivings on Brexit
SMEs in Germany are feeling upbeat about the future. Just as the KfW-ifo-Mittelstandsbarometer April results were going to press, optimism was on the upswing for the first time since November 2015. In terms of numbers, the change was reported at between 1.8 and 12.7 points. Dr. Jörg Zeuner, KfW’s head economist, breathed a sigh of relief: “Spring is coming to SMEs as well. [https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-KfW-ifo-Mittelstandsbarometer/2016/KfW-ifo-Mittelstandsbarometer_2016-03.pdf]
Unfortunately the generous breathing space could turn out to be shorter than expected. On June 23 the UK is called to vote on an historic referendum on whether or not it is to remain a member state of the European Union. All the experts are in agreement in the event of its departure, the economic effects would be felt in all the other member states. The debate is more about the extent to which the shock wave will affect the various sectors.
The SME Institut für Mittelstandsforschrung (IFM) is worried about te German SMEs. Brexit could have negative repercussions on companies that manufacture for export; in 2011 approximately eight percent of SME sales to EU countries went to the UK. If the UK abandons the European Economic free-trade area as well, ad hoc customs procedures will have to be put in place, with an increase in duties and separate procedures for the authorisation and assay of German manufactured goods, states Dr. Friederike Welter, chairman of IFM.
The truth is that no one knows what will really happen. Those pushing for the referendum are upset by the speeding up of European political integration while quite happy to reap the economic benefits – the UK enjoys not unsubstantial conditions of favour by its EU membership. There are good reasons to hope, therefore, that in the event of Brexit, the UK will stay inside the European Economic Area, not the least of which being the coming into force of the TTIP free trade agreement between the USA and Europe which would put United Kingdom exports at an even greater disadvantage.
German SMEs need have no fear of Brexit. After weathering the economic hardships of 2009/10, SMEs are in better health than ever. The percentage of equity capital is up and regional diversification in exports is broader based. SMEs are the backbone of the German economy. And if Brexit reaIly does happen – well, we’ll survive!