Despite the Brexit Crisis, Berlin's Economy Keeps Going Strong
Berlin's economy is growing faster than expected, and this despite the UK's looming exit from the EU, or “Brexit” for short. This is the gist of the latest economic forecast released by the IBB Investment Bank Berlin. While Berlin's economy already grew by 2.8 percent during the first quarter of this year, the IBB projection foretells an economic growth of 3.2 percent for the second quarter. Its predictions for Q3 and Q4 are slightly lower at 2.8 percent each. The reasons that experts have identified to explain this exceptional performance include, above all, the stable situation on the labour market, increased construction demand, and the prospering tourist business in the German capital. The forecast of the IBB economists is based on assessments provided by 1,500 businesses in Berlin. More than half of the survey respondents said they had increased their earnings last year. Moreover, 40 percent of them believe they will see the growth continue through the end of the year. The outlook appears to be particularly bright in Berlin's service sector, according to the poll.
Negligible Repercussions of the Brexit for Berlin's Economy
The IBB analysts believe that the repercussions of the Brexit for the performance of Berlin's economy will be very limited. This is true in particular for the import and export of goods because, unlike Germany as a whole, trading with the UK plays a negligible role for Berlin. The city's export business accounts for only 11.4 percent of Berlin's overall performance (while the ratio for Germany as a whole is 39.5 percent). Even if the exports from Berlin to the United Kingdom were to plummet suddenly, it would slow the city's total export growth by only 0.6 percentage points for the year as a whole. That said, such a scenario is unlikely to transpire anyway, as experts unanimously agree. Even the setbacks in the tourist industry caused by the Brexit will remain within a tolerable scope, or so the IBB believes. Against this background, the IBB economists see no reason to radically revise their economic outlook for Berlin because of the outcome of the British referendum.
Far more important for Berlin is the high number of new start-up businesses. The Senate of Berlin supports innovative young entrepreneurs and provides incentives to motivate them to relocate to Berlin. Indeed, it has stepped up its efforts to woo start-ups from the British capital. The very next day after the referendum, the Senate started mailing out its first letters to UK companies who might be looking to set up shop in mainland Europe, encouraging them to consider Berlin. The idea is to make the most out of the Brexit. First signs suggest that the initiative has met with interest. After all, the inflow of UK companies moving their offices to Berlin began to increase well before the referendum.