According to a study by consulting firm Ernst & Young, the Brexit decision and the subsequent effects for free trade are increasing Germany's appeal for investors. Some forty percent of foreign companies perceive Germany as an attractive investment location, an increase of two percent compared to last year. For around 54 percent of the companies active in Great Britain, Germany would be a preferred destination outside the U.K.
Should the U.K. leave the European single market, fourteen percent of foreign investors with a presence in the U.K. plan to change or relocate some of their European operations in the next three years. Overall, 11 percent plan to modify their U.K. presence in Europe following Brexit.
Nevertheless, new trade restrictions due to tariffs or regulations could place a burden on many companies. Hubert Barth, EY's Germany chief, warns: "As delightful as the growing attractiveness of Germany as an investment location is, this should not hide the fact that the departure of Great Britain from the E.U. will pose a lot of challenges to German companies."
According to the Ernst & Young survey, over 70 percent of investors have already experienced some impact from the Brexit vote. Among the 254 global investors surveyed, high volatility in currencies, commodities and capital markets was identified as the biggest risk to investment decisions in Europe, effecting some 37 percent. Economic and political instability within the E.U., both excluding the impact of Brexit (32 percent) and including the impact of Brexit (28 percent), were identified as the second and third biggest risks.
Daniel Tost is an editor with Handelsblatt Global. To contact the author: [email protected]