Easy access, easy communication, and with consumers who are still spending. No wonder Germany is our top European export market. Chloe Rigby reports.
If you’re looking to export to Europe, the chances are that Germany is high on your list of possible markets. It’s the number one export market in Europe for the UK.
In 2008 UK companies exported goods worth £25bn to the country, according to UK Trade & Industry (UKTI), and exported services worth a further £10.3bn. In 2007 South West exports to Germany were worth £1.8bn – 17.1 per cent of the goods and services the region sold abroad. And all the signs are that 2009 is a good time to be trading there.
While companies cut back their output in the fourth quarter of 2008, inventories rose and the number of people employed rose at one point to its highest level since German reunification – a factor put down to companies using flexible and short-time working.
That’s backed up by UKTI, which says German “consumer spending has defied expectation”, exceeding the European average for the year ending January 2009. “If there was ever a time to consider doing business with Germany, it’s now,” says Clive Wray, UKTI’s general manager in the South West.
“Germany’s growth was healthy before the global crisis hit, at 2.9 per cent in 2006, continuing with 2.4 per cent growth in 2007. “Many commentators believe Germany is the best placed of all developed EU states to deal with the crisis, presenting an attractive market for UK exporters. And UK companies benefit from EU free trade regulations.”
So what can South West companies expect to sell in Germany?
Mechanical engineering, automotive, aerospace, pharmaceuticals and chemicals are the main areas of commerce. Germany is also investing in ICT, medical, biotechnology and renewable energies.
“In no other country are there as many biotech companies, and for overseas multinationals Germany is the most attractive destination for research investment, after the UK, with key technology areas in nanotech, biotech and ICT benefiting from funding amounting to €1bn each year,” says Wray.
But he warns potential exporters that while Germany is a technically straightforward market, it is also competitive and partners must work hard to win orders.
“The German market can place heavy demands on UK businesses,” he says, “particularly on newcomers’ resources and marketing skills. For many sectors Germany is the largest European export market and trading is highly competitive, meaning UK companies have to be prepared.”
Claudia Lock-Fuerst, information manager at Enterprise Europe Network SW, says: "Research beforehand is essential; knowing your market and taking advice from support organisations is recommended.”
German companies have to register with a local or regional chamber of commerce, which will help with setting up, registering the business and accessing funding.
Lock-Fuerst says the market is enormous and recommends exporters start by focusing on a region. Which one will depend on the product. When it comes to doing business, punctuality and reliability is a virtue. She says: “Germans usually shake hands and exchange business cards when meeting.
Titles are important as they represent a hierarchy in the business community.”
Discipline and a serious demeanour are also characteristic, and reliability is crucial, which is “usually reflected in the thorough research and preparation a company carries out before a meeting”.
While German companies expect usually to conduct business in German, English has become more customary as a result of globalisation, she says. Meetings should be confirmed in writing beforehand.
Once you have found a buyer in Germany, there are also practical matters to consider. Lyn Palmer, of GWE Business West, says Germany is popular for new exporters.
“It’s a relatively easy country to do business in since it’s part of the EU,” she says. “But you still need to get to grips with rules on documentation, packaging and other areas.
“When invoicing customers you will need to show their German VAT number. By showing this you will be able to zero rate the sale. If you are selling to a German buyer who is not registered for VAT in Germany and you cannot show a VAT number, you will need to charge VAT at the UK rate.”
When sending goods you need to keep evidence of the export in the form of a bill of loading, air waybill, certificate of shipment or courier proof of delivery note to satisfy the UK VAT requirements.
Palmer adds: “If your cumulative combined sales and purchases to the EU exceed the HM Customs threshold (£270,000 a year), you must complete a monthly statistical report called an Intrastat.”
Finally, there are packaging regulations to consider. As with all EU states, any wood or wood packaging must observe phytosanitary controls. Under the order on control of packaging waste there are rules that apply to the disposal of packaging, including transit packaging, outer packing and retail packing.
“It’s the responsibility of the supplier to arrange for the recycling or disposal of packaging,” says Palmer. “German customers often have an agreement with a third party for this, but you will need to decide who is picking up the costs before agreeing a sale.”
Also in: May 2009
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