Flag symbolizes Brexit; Source: istockphoto.com/melis82

© istockphoto.com/melis82

On 29 March 2017, the UK government formally notified the European Union of its intention to withdraw from the EU.

On 19 June 2017, the United Kingdom and the European Commission opened the negotiations on the withdrawal of the United Kingdom from the European Union. All rights and obligations will continue to apply to the UK until the negotiations have been concluded. Until December 2017, the European Commission and the UK government negotiated the key withdrawal issues. These include the rights of EU citizens living in the United Kingdom (and vice versa), the issue of the Ireland/Northern Ireland border and the United Kingdom's remaining financial commitments.

On the basis of a joint progress report by the European Commission and the UK government on the priority withdrawal issues, the heads of state and government agreed at the European Council meeting on 15 December 2017 that sufficient progress has been achieved to move to the second phase of negotiations. In the second phase, the negotiations on the open issues are being continued and the legal text of the withdrawal agreement is being negotiated. In March 2018, the European Commission and the UK government reached political agreement on several chapters of the withdrawal agreement – these include in particular the chapters on citizens' rights, the financial obligations of the United Kingdom and the transition phase. However, nothing is agreed until everything is agreed. In the transition period, the entire EU legislation may continue to apply in the United Kingdom until 31 December 2020 – except for the UK's participation in the EU institutions. In this period, the United Kingdom would also remain a member of the EU Single Market and the Customs Union.

In addition, the talks on the framework for the future relationship were launched on the basis of the European Council guidelines of 23 March 2018 on the framework for the future EU-UK relationship. In the guidelines, the European Council confirms its readiness to conclude a free trade agreement and further third-country agreements in other areas with the United Kingdom, e.g. in the fields of security, foreign policy and transport. The guidelines again underline that participation in the EU Single Market based on a sector-by-sector approach is not possible. The framework for the future relationship is to be determined parallel to the conclusion of the withdrawal agreement as political declaration of both parties. The agreements on the future relationship cannot be concluded before the United Kingdom's withdrawal from the EU.

Background information

The United Kingdom in the European Union

The United Kingdom joined the European Union on 1 January 1973, together with Denmark and Ireland. This brought the number of Member States to nine. The United Kingdom comprises Great Britain (England, Wales and Scotland) and Northern Ireland. With around 65 million inhabitants, the UK accounts for 12.8 per cent of the total EU population. On 23 June 2016, UK citizens voted to leave the European Union.

Current economic relations with the United Kingdom

Germany and the United Kingdom share close trade relations. The United Kingdom is Germany's fifth most important trading partner (trade volume in 2017: €121.4 billion). For Germany, the UK ranks fifth in terms of exports and eleventh in terms of imports. In 2017, the volume of German exports to the United Kingdom totalled €84.37 billion. UK imports amounted to €37.07 billion.

Around 2,200 German enterprises employing approx. 412,000 people are doing business in the United Kingdom. German investors in the United Kingdom include Siemens, Bosch, BMW, VW, RWE, E.ON, Deutsche Telekom, Deutsche Post, Linde and Heidelberg Zement. In 2016, German direct and indirect investment in the United Kingdom totalled €118 billion.

More than 1,400 UK firms employing a total of around 267,000 members of staff operate in Germany. In 2016, UK direct and indirect investment in Germany totalled €42.4 billion, focussing on the manufacturing industry, the chemical sector and the oil industry (including BP, Shell, GKN, Rolls Royce).

Possible impact of the withdrawal on the German and European economies

Brexit will have economic repercussions for the EU Member States and especially for the United Kingdom. The extent of this impact will much depend on future contractual relations between the EU and the UK.

A recent study by the ifo Institute commissioned by the Federal Ministry for Economic Affairs and Energy contains an initial assessment of the economic impact on the German and European economies. Even in the most unfavourable scenario, the impact of Brexit on the EU economy, and the German economy in particular, ought to be manageable. That said, there may well be some sectors that are hit harder by these developments. You can find the study (in German) here (PDF, 1MB).