'No Deal' Brexit could see 14,000 automotive jobs axed in Germany

25 January 2018 Consultancy.uk 3 min. read
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Employment in the German automotive sector could downsize by more than a quarter following a ‘No Deal’ Brexit, a new report has warned. The close symbiosis of Britain and the EU’s largest economy could see the German automobile manufacturing segment lose out on almost €4 billion in revenues, thanks to tariffs that would be imposed if the UK and EU fail to reach a deal before Brexit negotiations conclude next year.

Much has been made of the potential havoc that a worst-case-scenario Brexit could wreak on the British economy. According to the Bank of England, as many as 75,000 financial sector jobs alone could depart British shores, following a harsh deal hypothetically being thrashed out between the UK Government and the EU. Elsewhere, high profile food manufacturers have already taken precautionary measures, with hundreds of jobs relating to Nestle, Colman’s Mustard, and Britvic making their way out of the UK last year.

However, little has been made of the impact that a post-Brexit environment could have on the rest of Europe. According to a recent study by Deloitte, however, the knock-on effect of a dreaded “Hard Brexit” could endanger up to 14,000 of the 42,500 jobs in Germany’s car industry. A possible No Deal scenario would almost certainly lead to stringent tariffs being levelled on trade with the UK, while a resulting crash in the value of the British pound would compound this, making British companies less able to purchase imports. These sales slumps would then impact the supply chain indirectly, lowering revenues for German suppliers, which they would probably seek to recoup via job cuts.Hard Brexit could see 14,000 automotive jobs axed in GermanyThe jobs found to be at risk by the Big Four professional services firm, were all at suppliers to carmakers, who could be hit by the introduction of tariffs, should Britain's negotiations with the EU about their future relationship collapse without a deal.

Deloitte’s study anticipated a loss of as much as €3.8 billion in the German automobile industry, in the 12 months following the conclusion of Brexit. Every fifth car part used in Britain originates from Germany. German manufacturers supply the British automobile industry directly, and are indirectly involved in the production of German and other European cars exported to Britain, and this interdependence of the suppliers with carmakers in Germany, Britain and other European Union countries, is primarily behind the likely loss.

Alexander Boersch, Chief Economist at Deloitte, said, "In the Brexit year 2019, a Hard Brexit would cause sales of German suppliers to shrink by 23% from €16.4 [billion] to €12.6 billion, which represents a decline of around 5% of German suppliers' current total turnover.”

Britain’s biggest manufacturing hubs are already apprehensive regarding their post-Brexit prospects, meanwhile. The news that a key aspect of their supply chain could stand to be severed, or severely impacted, by Brexit will do little to allay those fears.