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The Bavarian economy one year post-Brexit

Client

Bavarian Business Association

Year

2021


„Despite the free trade agreement, the framework for trade with the UK has changed significantly.“
Johann Weiß, Project Manager

How have foreign trade relations between Bavaria and the United Kingdom developed in recent years? What specific problems resulted from Brexit? These are the questions we have investigated for the vbw - Vereinigung der Bayerischen Wirtschaft e. V. (Bavarian Business Association). In the report, our economists also identify trade barriers that have emerged despite the free trade agreement, which has been in force since 2021, and point out the biggest obstacles that need to be addressed.

Brexit puts Bavarian-British trade under strain

Already in recent years, Bavarian-British trade has suffered from the uncertainties connected to Brexit. After the UK left the EU single market at the end of 2020, trade decreased further, while Bavarian foreign trade with the rest of the world increased significantly in 2021. Between January and September 2021, Bavarian imports from the UK were 19 per cent lower than in the previous year. Exports decreased by three per cent. In contrast, Bavarian imports and exports from and to the rest of the world recorded an overall increase of 18 per cent and 15 per cent respectively.

Trade and Cooperation Agreement versus Single Market

The Trade and Cooperation Agreement between the United Kingdom and the European Union has averted the worst case: Trade in goods between the two economic areas is neither restricted by tariffs nor quotas. Cross-border trade in many services also remains liberalized in many service sectors. However, many non-tariff trade barriers have emerged and hamper the trade in goods. Moreover, important service sectors are not included in the agreement at all. Furthermore, free mobility of workers between Germany and the United Kingdom is severely restricted now and work visas are required. The study points out that there are major areas in which the agreement between the United Kingdom and the European Union falls short of the previous conditions of the Single Market.

Major improvements required

The agreement has prevented the worst case, a “hard” Brexit. Nevertheless, major improvements in different areas are required. The regulations of the agreement must be improved to eliminate or at least minimise as many of the new trade barriers as possible. From a Bavarian business perspective, these are the key requirements:

  • Trade in goods could be facilitated by more mutual recognition of product regulations and conformity assessments. The same applies to SPS controls.
  • Trade in services would be facilitated by regulations that are as simple and transparent as possible.
  • To facilitate worker mobility, a standardised work visa would be helpful. In addition, qualifications should be mutually recognised as comprehensively as possible.

To the study (in german)

Authers: Johann Weiß, Eva Willer, Dr Michael Böhmer, Philipp Kreuzer

Do you have questions?

Your contact at Prognos

Johann Weiß

Project Manager

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Dr Michael Böhmer

Chief Economist, Head of Corporate Solutions

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