In this DAA interview, Matthias Machnig, former State Secretary of the German Federal Ministry of Economics and Technology (BMWi), explains the post-Brexit challenges facing UK companies in Europe. He is clearly of the view that the only way for them to assert their own interests effectively is by working with partners on the Continent who can offer them access to policy-makers and public discourse.
DAA: What are the fundamental questions UK companies now have to ask themselves with regard to their business activities in European member nations?
MM: Firstly, I would like to make one thing clear. The United Kingdom belongs to Europe geographically, culturally and also in a security-policy sense – not to the EU, but to Europe. It is now a matter of developing a new, joint political project to determine how the EU and the UK can work together in future in a globalised and polarising world.
A huge number of questions come to mind. For one thing, there are economic questions such as: How can we – based on the Brexit agreement – find solutions to enable future economic exchange and economic cooperation? A framework of political conditions will need to be defined and a post-Brexit policy developed. The EU Commission has a central role to play in this regard, although bilateral contacts will of course also have a significant part in all of this. It will be a matter of strengthening dialogue channels between the UK, the EU and key member nations. The task now is to identify common problems and seek joint solutions in order to reach a form of collaboration in the post-Brexit era. Official channels have a role to play here but also knowledge of the political and economic situation in the EU and the relevant member nations. Such platforms will become increasingly important and must be systematically developed.
DAA: And what challenges face UK companies in terms of public affairs?
MM: Up until now, the UK has been involved in the EU process of shaping public opinion and the flow of information. It was always clear what the European agenda was; the UK was included as an active participant in all of those processes. That came to an end with Brexit, which is why it is of central importance for companies to recognise at an early stage where Europe is heading on key issues of economic, financial and also environmental policy. Companies will need a compass and they will need platforms to address their concerns in the European Union and the individual member nations.
DAA: To what extent are UK companies active in the EU now affected by the regulatory requirements that prevail there, and how can they continue to influence them?
MM: Any company wanting to remain active in the internal European market, e.g. in the form of exports from the UK or in-house production capacity within the EU, will have to comply with European law. And there will be some lessons to be learnt as part of the Brexit process. Much of what used to be taken for granted no longer applies. We now face new challenges. Identifying them and also working with the EU Commission and EU member nations to develop solutions for new forms of economic cooperation in the post-Brexit era is the essential task here. Mediators will be needed to achieve this – mediators who know how to raise questions in the right places and help find workable solutions.
DAA: What levers do UK companies or even the UK government have in that sense to influence the European laws they now have to comply with? After all they no longer have any political power.
MM: The most important thing is to keep up with the political debate and the flow of information. If they don’t know what is happening – by which I mean beyond what we read in the daily newspapers – they will have no idea how to respond. So they will need an early warning system to monitor political decision-making and legislative procedures. And they will need access to key political decision-makers. They cannot do that alone – which was also the case prior to Brexit – but their need for assistance has now increased. Professional help will be required to plead their case, in the political arena, with the media, and also in the search for potential collaboration and partners in the form of trade associations or other companies. The question in all of this is how to come up with workable solutions. The bar has been lifted as the requirements have increased, so companies have to adapt to this and develop appropriate tools.
DAA: To be more specific, previously SMEs in the UK had interests on the continent that were organised for them via certain trade associations or bilateral arrangements with business partners – will this process change or will additional resources now be required?
MM: The need for constant monitoring of economic, political and legislative processes will increase so companies will have to boost their capacity in this regard. It is the only way to ensure they can formulate their interests at an early stage and insert them into the political process. The normal procedures that used to apply for inclusion in the EU decision-making and policy-forming process no longer exist. This is why monitoring – and identifying appropriate measures in response to it – will have greater weight and be much more crucial than before.
DAA: And as far as “doing things” is concerned, what will UK companies now have to do in order to find a sympathetic ear in Europe or make their voices heard on the European political stage?
MM: They will have to build new partnerships – not just at the level of political debate, but in the form of partners within trade associations, institutions, the media etc. To do this they will need professional advice, based on very detailed analysis of various processes. That is the task facing UK companies, and they will need services or service providers who can help them with this.
DAA: The protests by UK fishermen clearly illustrate the fact that Brexit will cause huge damage to many branches of the economy. Are we witnessing the downfall of the UK economy here?
MM: Brexit will present the UK economy with some key challenges. We are already witnessing that. When you look at certain logistical channels and see how they are changing and the additional bureaucratic costs associated with them, you get a feeling for what is happening. The UK economy is facing some major challenges. And we should not forget that Europe is the UK’s most important trading partner – and, by the way, one of Germany’s key trading partners too. The UK’s departure from the EU marks the loss of a central trading partner in terms of economic volume. This is why it is important to now also take a bilateral approach to how the economic harm occurring on both sides can be minimised and see how new forms of collaboration can be developed. This takes me back to my initial comment that politically, geographically, culturally and in a security-policy sense the UK belongs to Europe. Unfortunately it no longer belongs to the European Union.
Dr Benjamin Seifert, Managing Director and head of the Berlin office of Deekeling Arndt/AMO conducted the interview.