Weekly Review The Return of the Native

This week in Düsseldorf, Britain and Germany unofficially began their two-year dialogue to part ways over Brexit. Judging by the initial reactions, it may be a long, hard slog, writes Handelsblatt's editor-in-chief.
European Commission President Jean-Claude Juncker and British Prime Minister Theresa May at a meeting of European leaders in Malta on Friday to discuss the migration crisis.

In a crowded hotel ballroom on Thursday in Düsseldorf, Britain and Germany came face-to-face publicly for the first time, so to speak, to begin the messy, laborious business of sorting out Brexit.

For 43 years, since Britain joined the European Union, these meetings tended to be collegial, constructive, even warm. But on this evening, the chemistry was different, the audience a tad distant, like lifelong soccer fans watching the return to the pitch of their team’s favorite player.

But this time he’s wearing the jersey of the opposing squad.

The U.K. was represented by Greg Hands, the Minister of State for Trade and Investment in the newly created U.K. Department for International Trade. The cabinet agency was set up last summer to help Britain negotiate a trade agreement with the 28-nation bloc, which buys about 44 percent of all U.K. exports.

In the audience were prominent representatives of German and European industry, many with operations in Britain, including the Dutch-born former Bayer CEO, Marijn Dekkers, now chairman of Unilever, and other CEOs.

Mr. Hands, an articulate, persuasive internationalist who speaks German and whose wife grew up in former East Berlin, outlined some of the arguments Britain will lay out in coming months in Brussels, Berlin and other E.U. capitals. The highlights: Britain will remain the world’s biggest defender of free trade, even after it leaves the E.U. Britain is not turning its back on the E.U., and wants the bloc to thrive and survive after it leaves; it’s in Britain’s interest. Britain’s top priority: Revive a strong trading relationship with the E.U.

“This is our moment to build a truly global Britain,’’ Mr. Hands said.

Britain’s ties to Germany are substantial and the mainline runs through Düsseldorf, the capital of North Rhine Westphalia, a state in which 61,000 Germans work for 104 subsidiaries of British companies. In Britain, 100,000 Britons work for 578 German firms.

For most executives in the audience, Brexit means nagging, potentially costly, uncertainty, and most were hungry for insight.

One German executive working for a U.K.-based firm told me Brexit may force his employer to move its headquarters – at least for accounting purposes – out of Britain, because its financial results may become too tied to fluctuations in the British pound. The firm only makes a fraction of its global sales in Britain, but reports its financial results in pounds, which was always a non-issue, but may become one, after Brexit.

Mr. Hands told the audience investors weren’t abandoning Britain, on the contrary.

Since Brexit, investors have ploughed 16 billion pounds into the country, a vote of confidence in Britain’s future.

For Germany and the rest of the E.U., the British market, while significant, is not essential – it accounted for only 16 percent of E.U. exports in 2015. In 2016, German exports to Britain fell by 3 percent, and may fall even faster as Brexit kicks in, according to the DIHK German Chambers of Commerce and Industry.

After his speech, Mr. Hands took questions. The discussion took place under Chatham House rules, and I can’t quote it here and identify the speakers. Let’s say the questioning was polite but probing and at times, skeptical, with one CEO stating flat out: The Brexit vote was not about trade; Brexit was about stemming immigration. A new trade policy is the effect, not the cause.

Mr. Hands gamely fielded the queries, and at the end, received a loud round of applause from his audience.

But like the applause at the end of a closely played sporting match, this was only the beginning.


Kevin O'Brien is Editor-in-Chief of Handelsblatt Global. To contact the author: [email protected]