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No-deal Brexit would be bad news for Danish industry: analysts

Companies in Denmark would likely see fewer orders being placed should the United Kingdom and European Union not reach a deal on the terms of Brexit, analysts say.

Published: 18 October 2018 17:32 CEST
No-deal Brexit would be bad news for Danish industry: analysts
PM Lars Løkke Rasmussen and British counterpart Theresa May in Copenhagen earlier this year. Photo: Mads Claus Rasmussen/Ritzau Scanpix

A predicted downturn in the British economy would be the most likely factor affecting Danish industry in the event of the UK leaving the EU without a deal on March 29th next year, Danske Bank senior analyst Mikael Olai Milnøj said.

“It will particularly affect British companies’ desire to invest, because Brexit will create enormous uncertainty,” Milnøj told Ritzau.

“That could result in a slowing down of the British economy and thereby also the demand for Danish goods,” he added.

The UK is a highly important export market for Denmark, with food and medical products among goods crossing the North Sea. According to official stats agency Statistics Denmark, only Germany, the United States and Sweden are larger export markets for Denmark.

Although the exact economic impact of Brexit is difficult to predict, the International Monetary Fund estimated earlier this year that a no-deal Brexit could cut Denmark’s gross domestic product by one percent, which corresponds to approximately one billion kroner annually.

According to IMF, Denmark is one of the three countries outside of the UK – along with Ireland and the Netherlands – which will be most impacted by Brexit.

Anders Ladefoged, deputy director with the Confederation of Danish Industry (Dansk Industri, DI) said that trade with British companies would become more difficult if no terms were reached prior to Brexit.

“It will be a confusing and chaotic situation, because Brexit affects everything from customs to rules on products and transport,” Ladefoged said.

“Companies must soon start treating the United Kingdom as a third country which may have high tariffs on some products,” he added.

Exports may also be affected by more complicated processes for goods entering the UK.

“The long-term effect could be that the (Danish) economy does not grow as quickly as it otherwise would have, because it is benefitting less from the advantages of free trade,” Milhøj said.

Both Ladefoged and Milhøj added that the UK would continue to be an important market for Denmark, even in the event of a no-deal Brexit which could mean tariffs like ones currently in place for trade with important partners like the United States and China.

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ECONOMY

Explained: Why Denmark’s economy is looking in such extremely good shape

Denmark's economy is growing faster than the government expected, inflation is falling faster, and employment is holding up better. We explain why the new economic forecast shows Denmark has achieved the softest of soft landings.

Published: 16 May 2024 15:41 CEST
Explained: Why Denmark's economy is looking in such extremely good shape

 “When I stood here a year ago and presented my first financial statement, it was with a message that the Danish economy was heading for a soft landing. We have since been strengthened in that assessment,” Stephanie Lose, Denmark’s economy minister, said at a press conference announcing the government’s Økonomisk Redegørelse, or financial statement, for May. 

In the press statement, she said, “optimism is returning to the Danish economy”, with the economy likely to improve further in the coming year.

“We have carried out reforms that make Denmark richer and help to secure the necessary workforce for Danish companies,” she said. 

How has the government changed its growth forecasts? 

The government has increased its expectation for Denmark’s growth rate since its last statement in December, with it now expecting 2.7 percent growth in 2024, up from the1.4 percent it expected for the year in December. 

It has also upgraded its expectations for 2025, predicting growth of 1.8 percent compared to the 1 percent it expected back in December. 

Lose said that the pharmaceutical company Novo Nordisk, which is expanding rapidly as a result of the success of its weight-loss drugs Ozempic and Wegovy, had driven much of Denmark’s recent growth, with the reopening of Denmark’s gas field, the Tyra field, would start to contribute to growth soon.

“In the past two years, the pharmaceutical industry in particular has driven growth in the Danish economy, while there has been stagnation or decline in large parts of the rest of the economy,” she said. “In the coming years, other industries again look set to contribute to growth. Added to this is the reopening of the Tyra field in the North Sea, which also contributes to growth in GDP.” 

What does the government expect to happen to inflation? 

Denmark’s inflation rate fell rapidly from a peak of over 10 percent in October 2022 to below 2 percent in September 2023, where it has stayed ever since. But Lose said she expected the rate to edge up over the coming years. 

“Inflation has fallen quickly and faster than expected,” Lose said. “In the new forecast, we expect inflation to rise in the coming months, as the prices of services and energy pull in the direction of slightly higher inflation.” 

What does the government expect to happen to employment? 

Thanks mainly to Novo Nordisk increasing staffing to manage the success of its new drugs, and the bounce back from the pandemic, employment has also held up better than expected.

Employment soared by some 160,000 people between 2021 and 2023, and the government now expects the number of employed people to grow by a further 13,000 in 2024 but to then fall by 18,000 in 2025. 

“Employment has long been at a sky-high level, so it is estimated that we will see some adjustment. But we do not expect an extensive setback, because the Danish economy stands on a rock-solid foundation,” Lose said.

What does the government expect to happen to housing prices? 

The government has significantly upgraded its expectations of what will happen to the price of domestic property this year. It now expects prices to increase by an average of 3.2 percent in 2024 and 3 percent in 2025, a rise of two percentage points on the 1.2 percent rise for 2024 it expected when it made its last forecast in December. 

This is due to the continued strong labour market, which has seen rising incomes and wage increases in Denmark as a result of new collective agreements, at the same time as Denmarks Nationalbank is expected to cut interest rates. 

This rise follows two consecutive years of falling real house prices in 2022 and 2023. 

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