An association speaking on behalf of Germany’s engineering sector said that keeping the UK in the single market should not happen at any cost, although the sector stands to suffer economic losses.
Holger Kunze from the VDMA association told Reuters that although members of the organisation would prefer a Norwegian-style deal for the UK, the ultimate priority should be the survival of the bloc with its 27 member states.
Norway, although not a member of the EU, is part of the European Economic Area. In addition to paying regular contributions to the EU budget, it also respects the freedom of movement of EU citizens, which is expected to become a major sticking point in the Brexit negotiations.
"The bottom line is, let's save the European Union, that's the first priority,” Kunze said. “Let's see that the UK stays as close as possible to the internal market - but this cannot be achieved at any price."
VDMA, with its 3,100 member companies one of the largest industrial associations in Europe, said German engineering firms already saw exports into the UK declining by four per cent in the first quarter of 2016 ahead of the Brexit referendum.
"Companies are facing insecurity,” Kunze said. "What I am hearing now from companies I know is that some of them are trying to relocate their business from the UK to the continent. The political and legal uncertainty in the transition period is already leading to falling exports to Britain at one in four companies."
For VDMA members, which include engineering giants such as Siemens and MAN SE, the UK is the fourth most important export market after the USA, China and France. In 2015, German engineering exports to the UK amounted to €7.2bn.
Some VDMA members are already concerned about barriers to free movement, Kunze said. One German firm which had recently concluded a contract to build a plant in Britain was worried about how its experts would be able to travel there to follow up on construction work in the event of Brexit.
The German Chambers of Commerce and Industry (DIHK) revised its forecast of exports of German goods into the UK for this year on Thursday from an estimated five per cent growth to a one per cent fall. In 2017, it expects a further five per cent drop.
"Brexit has made abundantly clear what an important achievement the integrated EU single market is for German companies,” said DIHK president Eric Schweitzer.
“The EU should make every endeavour to ensure the cohesion of the 27 member states."
He further added that German companies already plan to scale back investment and employment in the UK, fearing barriers to trade.