Overseas Ambitions: Will Brexit Concerns Finally Coax British Manufacturers to invest in Germany?
Think of a German company that has become a successful manufacturer in Britain? It’s not hard to do. BMW, Bosch, Siemens, Thyssenkrupp – this list is seemingly endless.
Now try it the other way around. Think of a British manufacturer with thriving operations in Germany? Rolls-Royce aero-engines. And, err. The run of names soon comes to a halt.
This disparity has been a source of puzzlement for decades. Why is it that German manufacturers can deliver sustainable business growth in Britain, yet it rarely happens in reverse? The answer, it seems, is partly historical and partly cultural.
Firstly, as the fourth largest economy in the world, Germany prides itself on the capabilities of its manufacturers. The make-up of the German industrial base means that its indigenous companies can supply pretty much all the country needs.
This performance is forged, primarily, on the core strength of Mittelstand, a diverse band of medium-sized companies which are often family-owned and run. These firms are renowned for their financial independence and extreme focus on quality and training. This mindset provides ferocious competition for overseas rivals looking to enter the domestic marketplace.
Also, historically UK manufacturers have tended to expand abroad through mergers and acquisition. But the very nature of the Mittlestand – privately-owned, well-financed, and with little debt – means such deals are difficult to strike. And so, attention inevitably turns elsewhere. There has also been a reluctance in Germany, both at a political and societal level, to see historic industrial names fall into the hands of overseas buyers.
“These factors, combined with a deadly mix of ignorance and arrogance, means many British firms have failed to establish a presence in Germany, despite harbouring ambitions to do so,” says David Scrimgeour, founder of the British German Business Network. “That’s a shame, because although the German market can be notoriously difficult to access, if you do get it right, then the potential business rewards are enormous.”
But despite these engrained historical factors, there are signs of change to come. The first tentative indications of renewed ambitions from British companies in Germany have begun to emerge. New figures released by the Germany Trade & Invest agency show that 152 British firms registered foreign direct investment projects in Germany in 2017 – up 21% on the previous year. That’s quite some sudden spike in activity.
So, what’s going on? Well, according to Germany Trade & Invest (GTAI), it all comes down to the dreaded B word. “We are convinced that this increase is a direct consequence of the Brexit decision,” says Thomas Bozoyan, manager of research at GTAI. “It’s part of a wider trend which has seen British foreign direct investment increase across Europe,” he adds, suggesting that fears over trading access in the European Union post-Brexit are encouraging British companies to make contingency plans.
These ambitions have to be realised, though. And that means avoiding the mistakes of the past. Success in Germany can only be delivered by taking a strategic, long-term approach - building and maintaining trusted relationships with a host of key players including customers and business partners.
There is no shortcut, insists Scrimgeour – who has these words of advice. “British companies will have to replicate what German companies have been doing in the UK for decades – get on a plane, meet people, have a plan, build relationships, make friends, commit time and money and set up shop here. Do that, and success is possible – no matter where you are from.”
These are fine words indeed. Now all it needs is for previously reticent British manufacturers to put their plans into action.
Lee Hibbert, Industry Analyst and Content Director, Technical Associates Group (Editor of Professional Engineering, February 2010 - January 2016)
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