Brexit and German-British Production Chains – A Sector-Level Analysis of Value Chains

Summary:

The United Kingdom is a key trading partner for the German economy and the withdrawal of the United Kingdom from the European Union is therefore likely to have a significant impact on economic relations between the two countries. In addition to trade in end products, trade in intermediate inputs is also of major importance. Intermediate exports include value added from the exporting country as well as from "upstream" foreign countries. For trading partners, the value added that is traded is particularly relevant, as it often cannot simply be substituted by value added from other countries. The consequences of Brexit for the German-British trade partnership can hardly be assessed until the withdrawal procedure has been finally determined. However, in order to quantify and assess which industries in Germany and the United Kingdom would be affected by Brexit and to what extent, it is important to first determine the current value-added relationships.

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