Cliff-Edge Brexit and Germany

Banking & Finance
| The European | 23rd October 2018
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Brexit has become a headache even for powerful political negotiators. The latest comment on Brexit came from the Governor of Bank of England, Mark Carney, who said, “The system is ready to handle a disorderly cliff-edge Brexit”.

 

Financial institutions are departing from London’s “Square Mile” to settle in their new quarters in the European Union bloc. However, Brexit does not mean Armageddon for the European Union.

 

The European Union bloc countries are working overtime to find economic opportunities for their countries which will arise due to Brexit. The emotional 52 (yes): 48 (no) Brexit referendum is now viewed with skepticism even by promoters of Brexit. Political pundits are fighting tooth and nail over terms of Brexit. On the other hand, financial market gurus are of the opinion that if a second Brexit referendum is carried out, the results might be different from the first one.

 

Germany, the European Union economic powerhouse, is all set to facilitate the UK registered businesses. While some EU bloc countries are laser focused to grab the businesses of the financial institutions exiting the UK, Germany wants to accommodate small businesses.

 

There’s no denying that the financial sector is the heart of the global economy. However, the modern economic principles emphasize the importance of the small business sector. Small businesses provide jobs to locals. Departmental stores, gas stations and other small businesses meet the day-to-day demands of local residents. Some of these businesses also succeed in exporting their products and services, thus giving a boost to the national economy.

 

Small businesses also support medium and large enterprises. They contribute to the local food supply chain. In short, small businesses are the wheels of the economy on which different businesses rely on.

 

One of the primary reasons that Germany is now the economic powerhouse of the EU is that its economy is productive. The economy of Germany is business focused and diversified. Tools, heavy machinery, autos, locomotives, aerospace, robotics and local small businesses, all are components of the German economy.

 

Latest News

 

CNBC (10 October 2018) reports,

 

“Germany has proposed a new legislation to allow British registered Small and Medium Enterprises (SMEs) to convert their business registration to German. Around 10,000 German-based businesses are registered under British rules”. 

 

Under the new German regulations (subject to parliament’s approval), the conversion from British to German companies will be allowed without any requirement to increase share capital.

 

The UK offers a low cost of business incorporation (Limited Liability Company) due to which small businesses prefer to get registered under British laws. In Germany, minimum share capital for registering a Limited Liability Company (Gmbh) is Euro 25,000/- (out of which Euro 12,500/- must be paid). An LLC in the UK can be opened even if you have 100 UK Pounds in your pocket.

 

German small businesses preferred to register their businesses in the UK for the very same reason. However, they were operating their businesses from Germany. The direct beneficiary was the German economy.

 

The UK government did not focus on a productive economy. The financial industry, real estate market and other such sectors were thriving in the UK market. However, the overall economy was not business oriented. In fact, the UK could not achieve self-sufficiency in basic economic sectors. For example, for essential food supplies, the UK is reliant on the EU. Thousands of trucks, carrying fresh produce from the EU, are processed daily at the Port of Dover.

 

Comment by German Official

 

German Justice Minister Katarina Barley said, (to Handelsblatt – a German-language business newspaper):

 

“Many small companies and people who set up their own business have in the past opted for the British limited, a form of incorporation which is simple to set up,”

 

“Brexit poses a serious challenge for them. We want to help them.”

 

The Draft regulations, if passed by the German parliament, will be named as the “Transformation Act”.

 

Other notable steps being considered by Germany to deal with post-Brexit challenges

 

Under German laws, civil servants are required to be the EU citizens. Germany is considering changing this legislation to ensure British citizens can remain employed as teachers in Germany after Brexit.

 

Germany has also submitted a bill for a law that would allow British citizens living in Germany to become German citizens after Brexit while retaining their British citizenship.

 

The deadline of Brexit is looming. Germany is well prepared to cope up with post-Brexit challenges. The steps taken so far indicate that as always Germany has kept its economic priorities on top.

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