However, in the last three years the German government’s trade and investment agency GTAI has been registering a steady increase of British companies enquiring about setting up subsidiaries. What has changed and is this a trend or only a knee-jerk reaction to current trading difficulties?
2019 saw some concerned businesses making last minute efforts to rent Dutch warehouses or even establish operations there to benefit from the investor-friendly tax environment. Traditionally the Netherlands has been the first port of call for UK companies expanding to “Europe” so this cannot be seen as a new development but rather as an intensification of past practices caused by the impending border controls. What is new, though, is the extension of cross-border activity into the world’s fourth largest economy.
My decision to make a life in Germany was because of a woman from Bavaria who is now my wife. And, after thirty years, this is very definitely my first home, Scotland being our second. I have spent a chunk of this time working on projects and ideas to connect business between the two countries. Mostly, this has not been very rewarding financially, mainly because of the huge cultural differences in the way that business is done. It was the occasional exceptions and the small successes that made me keep trying - similar to playing golf when I think about it!
The number of companies from the UK expanding to Germany hit an all-time record of 185 in 2019. The main attraction now is not only accessing this market but in having a continental European operation which opens up trading opportunities across the EU. In my experience this is new, it is a strategic emphasis recognising the realities of doing business in multiple markets and, above all, taking a long-term view of business development. This appreciation of realistic timescales is absolutely key to succeeding here and it has been missing.
Ironically perhaps, the split from the EU has caused decision-makers in companies of a certain size to consider the question: “what is our strategy for Europe?”. The result of that thought process has usually been the realisation that there is no strategy! We are currently advising a London-based online services pure play which has hit the ground running in Germany and has generated fantastic revenue from day one. Now the owners are following up with a strategic expansion of their operations in Europe from a German base. Having existing customers here is a prerequisite for establishing a subsidiary and hiring local staff.
And I am very pleased to report that we have just started to advise a great Scottish company that has been doing business here for decades and is now taking the plunge. And I am convinced that there are many more companies to follow and am very much looking forward to watching them thrive in this fantastic market.
David Scrimgeour MBE, formerly the Scottish Government’s investment representative in Germany and Austria, is now working as a renewable energy consultant in Munich