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German industry group preparing for hard Brexit
September 6, 2017 / 12:10 PM / 19 days ago

German industry group preparing for hard Brexit

FILE PHOTO - German, British and European Union flags fly in front of the Reichstag building in Berlin, Germany July 20, 2016. REUTERS/Hannibal Hanschke/File Photo

FRANKFURT (Reuters) - Germany’s biggest industry group has set up a task force including companies such as Airbus, Siemens and Deutsche Bank to prepare for a disruptive British departure from the European Union, according to people involved.

The Federation of German Industries (BDI) task force will identify by the end of December the risks to German industry from a “hard” Brexit after monthly meetings of dozens of experts, the people said.

The preparations are the result of growing nervousness amid slow and acrimonious negotiations between Britain’s Brexit minister David Davis and his opposite number at the European Commission, Michel Barnier.

In Germany, companies are now preparing for the worst, including the imposition of tolls and the risk of a loss of access to London financial markets, the people involved said.

“Many people in Britain have hoped that they would get a special deal from Germany. We’ve been saying for a year that this is not going to happen,” said Markus Becker-Melching of the Association of German Banks, which is involved in the task force.

“We are working on the basis that there will be a hard Brexit,” he said. “The wheels are now set in motion to prepare for this.”

One person directly involved with the task force, who asked not to be named, added: “We have to plan now for there being no agreement, for things not working.”

The existence of the task force, which was established in June and is now accelerating its work in regular meetings in Berlin, will be officially announced in early October.

Its conclusions in December will be important in shaping the position of the new German government, which may be in place then following elections later this month.

The companies involved declined to elaborate on the work of the task force.

DERIVATIVES WORRIES

More than six months into Brexit divorce talks that must conclude by April 2019, there is little sign of progress.

Earlier this week, Britain’s David Davis warned a row over how much money Britain should pay the EU when it leaves would probably last the duration of the negotiations.

The EU has said this and other issues must first be resolved before talks on future trading relations can begin.

Frustration has meanwhile been building in Germany, Europe’s industrial heartland and the EU’s biggest economy.

Late last month BDI president Dieter Kempf criticised the British government for its conduct in negotiations.

“The British government continues to lack a clear course,” he said. “Despite declarations of unity from British cabinet members, there is no coordinated government approach.”

The BDI, with 36 member associations representing 100,000 businesses, is one of Germany’s most influential lobby groups.

One of the problems at the top of its list, alongside possible tariffs, is the potential disruption to multitrillion-dollar derivative markets.

These are based chiefly in London and are an essential means for German companies to hedge against risks such as rising oil prices.

“While a straight-forward company loan would not really be touched, the derivatives market poses a big potential problem,” said the person directly involved with the task force.

“No one should work on the assumption that there will be rules in place in time to deal with this.”

Reporting by John O'Donnell; Editing by Mark Potter

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