MNI INTERVIEW: German SMEs Need Brexit Clarity-Industry Chiefs

--Brexit, Covid Could Drive Supply Chain Changes - Mittelstand Leaders

By Luke Heighton

     FRANKFURT (MNI) - The European Union must act quickly to end uncertainty

over an eventual trade deal with the UK and provide clarity for mid-sized German

companies highly exposed to Brexit, the head of a leading German industry

association told MNI, with his concerns echoed by another senior representative

of the country's key Mittelstand sector.

     Brexit negotiations were heading in a "very uncertain direction ... which

means our member companies and associations still can't prepare themselves

properly for the possible consequences of a no-deal Brexit," BVMW president

Mario Ohoven said in an emailed response to questions Tuesday.

     "New tariffs, different rules of origin, export costs and as a result more

bureaucratic expenditure are some of the most problematic and intensively

discussed topics among our members. This is what the EU needs to find solutions

for soon," Ohoven said.

     Ludwig Veltmann, CEO of the Mittelstandsverbund, was also concerned, with

84% of his members - already struggling to deal with the Covid-19 impact --

having at least part of their supply chain in the UK.

     "There is a very close connection. So no deal would be a big problem. Even

a deal would still be a big problem," Veltmann said.

     --SUPPLY CHAIN CHANGES

     The prospect of serious Brexit disruption comes just as the Mittelstand has

been hit by the Covid-19 pandemic, which Ohoven said had hit Germany companies

particularly hard as they are so integrated into global supply chains. The

pandemic may prompt German industry to reduce its reliance on some external

suppliers in countries such as China and India, he added.

     "Such dependence can always develop into a big problem," he said,

"therefore we hope that supply chains may change away from this dependence, that

all kinds of basic production can also take place in Germany."

     --EU DEBTS

     Other issues vexing Germany's business community include the potential

mutualisation of sovereign debt across the EU and Brussels red-tape.

     Any sharing of debts incurred by European member states' during the

Covid-19 crisis would be "unacceptable" to many German businesses and may have a

politically polarising effect, according to Ohoven.

     "For the German Mittelstand, a communitisation of debts is unacceptable,"

he said. "The financial support granted by the rescue fund will be paid by

German taxpayers and it is unlikely that states like Italy or Spain will be able

to pay back. Therefore, the rescue fund rather endangers the European solidarity

than building a sustainable EU."

     But Veltmann was more in tune with the recent stance of Angela Merkel and

Francois Macron on debt mutualisation. "You cannot have a joint currency and a

joint economy without a debt union," he said.

     Ohoven also called on the EU to strengthen SMEs by implementing a dedicated

strategy, including "a new definition of the size of SMEs including bigger

family businesses and owner-managed companies. In addition, bureaucracy must be

reduced in the EU context."

     He was full of praise for the European Central Bank, saying the recent

scheme to purchase commercial paper had proven to be a "good measure to help the

companies ... it improves the transmission of the ECB's monetary policy measures

to the real economy by easing funding conditions. It provides additional

incentives for companies to access capital markets."

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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