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Business leaders hail clear UK election result

Hardy Graupner
December 13, 2019

German business leaders have said the unambiguous election result in the UK removes some of the uncertainty of the past. But they warned that Britain needed to work hard to get a trade deal with the EU done next year.

BMW Mini production near Oxford
Image: Getty Images/AFP/T. Akmen

Given the clear scale of the Conservative majority in the UK, the nation's exit from the European Union could finally be pushed through by the end of January.

The managing director of the German Engineering Association (VDMA), Thilo Brodtmann, on Friday welcomed the clear election result, saying that "now the EU and Britain have to focus with all might on hammering out a free trade deal by the end of next year."

"If that doesn't work out, hard-Brexit debates and the uncertainty related to them will start again, and that has to be avoided by all means," he added.

The fog is lifting

The director general of the Federation of German Industry (BDI), Joachim Lang, commented: "the fog in London is finally receding."

"What's needed now is a clear course in the UK over what exactly economic relations with the European Union should look like in the future."

Carsten Brzeski, chief economist at ING Germany, told DW that investors right now were happy about the election result clarity, reflected also in the rise of the British pound's value.

"But if investors take a longer-term view, they'll also realize that noting much has changed — we will get the Brexit agreement, but the UK will still have to enter a transition period and will still have to negotiate a trade deal with the EU," Brzeski noted.

Getting this done "may take a long time, so market uncertainty will certainly come back during that period," the economist warned.

Clemens Fuest, president of the Munich-based ifo research institute, agreed. He said it would be difficult to agree on a free trade agreement by the end of 2020, adding: "In Scotland, we may be heading toward another independence referendum, and that may also bring additional uncertainty."

The president of the German Institute for Economic Research, Marcel Fratzscher, told DW the German economy would have to pay a high price even in a soft-Brexit scenario. "We estimate that the German economy will lose about 0.3% of GDP growth next year and the year after due to Brexit," Fratzscher noted.

Cutting both ways

Deutsche Bank Macro Strategist Oliver Harvey said in a research note that the UK election result "is a double-edged sword."

"It will remove much of the day-to-day uncertainty that has plagued the UK outlook; there will be no more parliamentary defeats for the government," he emphasized.

"On the other hand, it provides Prime Minister Boris Johnson with a close-to-free hand when it comes to negotiations with the EU and will remove parliamentary checks and balances should the government decide to follow through on manifesto promises for a hard Brexit by the end of 2020."

'Uncertainty bound to return'