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German Mittelstand wants ‘soft Brexit’

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Worker at India-Dreusicke engineering firm in Berlin, 2008 file picImage copyright AFP
Image caption India-Dreusicke plastics: Many German small firms are geared towards exports

Germany’s “Mittelstand” of small and medium-sized firms (SMEs) could lose billions of euros if the UK is shut out of the single market, an industry representative has warned.

The boss of the BVMW, which represents more than 270,000 SMEs, told the BBC “a hard Brexit would harm both sides”.

Mario Ohoven added that negotiations should be “guided by economic sense and not by political ideologues”.

The remarks diverge from the position taken by other leading German voices.

In September last year, the head of the BDI, a powerful German business lobby whose members are larger companies, told the BBC it was “better to have a hard Brexit that works”.

German politicians have almost unanimously underlined that the UK cannot have unfettered access to the single market unless it allows for the free movement of EU citizens.

In her letter to the EU last week, Theresa May said the UK would “not seek membership of the single market” in the upcoming negotiations.

‘Worst result’

But Mr Ohoven emphasised that the close economic ties between the UK and the German Mittelstand – which makes up the bulk of the country’s economy – meant a Brexit deal without single market access would be damaging to both countries.

“Germany exported goods worth 89bn euros to the UK alone in 2015, almost half of it was exported by 150,000 German SMEs,” he said, adding that many more companies traded indirectly with the British market, as well as relying on UK research and development.

“In the end, a soft Brexit should be reached. It is important that the UK stays in the single market, or that the UK joins an agreement similar to the the EFTA (European Free Trade Association), similar to Norway or Iceland.

“The worst result would be if the EU and the UK did not reach an agreement in time,” he added.

Image copyright BVMW

That sentiment was echoed by Dirk Rothweiler, the chief executive of First Sensor, a Mittelstand firm that makes almost 7m euros a year from sales to the UK market.

Dr Rothweiler, whose company in the east of Berlin provides highly specialised sensor chips for products such as premature baby incubators and autonomous vehicles, said pragmatism was “what the industry was interested in”.

“It would be very desirable not to have trade barriers, and if so to have the least possible amount of trade barriers in both directions”

‘No winners’

The BVMW’s Mario Ohoven emphasised that all four freedoms of the EU – the free movement of goods, capital, services and people – were important to the businesses he represents, at which almost 6% of employees are from elsewhere in the EU.

“We shouldn’t forget that 750,000 jobs in Germany depend on the trade with the United Kingdom”, he added.

Mr Ohoven dismissed the idea that a “hard Brexit”, with the UK no longer in the single market, could benefit some SMEs who may face less international competition.

“The German Mittelstand does not believe in the world economy as a fixed size cake, in which every country has to fight against the other countries to increase its share.

“A hard Brexit, or an increase in protectionism, will only lead to a decrease of the cake as a whole,” he warned.

“I want to be very clear here – Brexit knows no winners, all sides will lose.”

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