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German carmakers must prioritize Europe ahead of the UK post-Brexit, says Merkel ally

  • German automakers understand that trading with European partners will have priority over the U.K. post-Brexit, Alexander Radwan, MP with the Christian Socialist Union told CNBC on Tuesday.
  • London's top banking officials "already know" that Germany would be a great place to relocate after Brexit.

German carmakers must be prepared to face a painful truth post-Brexit and prioritize deals with European trading partners over the U.K., a Bavarian lawmaker told CNBC on Tuesday.

"When I speak to carmakers in Germany – especially in Bavaria – so BMW (for example), they tell me the U.K. market is so important for them and then I ask them the question, what is more important… a working European market or the U.K. market?" said Alexander Radwan, finance expert and member of the Christian Socialist Union (CSU).

"I think they have a preference for the European market and not to the U.K. market and this is the benchmark we have to look at with all deals," he added.

BMW, along with other German-based European arms of GM and Ford, all of which have U.K. based plants, have suggested that trade barriers would bring significant and currently incalculable costs.

European automakers are particularly vulnerable to trade barriers as parts can move across borders several times to make a finished product.

British Prime Minister Theresa May has pledged to take Britain out of the EU's single market – a tariff-free trading bloc for goods and services – in order to gain more control over immigration. May's government is due to begin formal talks with the EU within days.

Chancellor Angela Merkel had warned the U.K. last month that while the EU would "naturally" respect the interests of the 48 percent of Britons who voted against Brexit, the U.K. would have to "pay its price" should Britain's government end the free movement of people.

Radwan, who works for Merkel's sister party in Bavaria, argued that any potential deal for the U.K. to exit the bloc must not become a "blueprint" for other countries to do the same. He argued the principal aim of the upcoming discussions would be to unite Europe.

London's banking officials 'already know' Germany is great

When Radwan was asked whether he had made the trip to London in order to try and persuade some of the city's top banking officials away from Europe's financial center, he replied, "I think they already know it, it is great in Germany (whether you are in) Frankfurt or Berlin or Munich."

London's lenders are reportedly meeting various supervisors to explore the pros and cons of moving parts of its business, or indeed headquarters, to other European cities. City banks are seeking to maintain their services throughout the bloc post-Brexit.

On being challenged that these same bankers were, for the time being at least, still in London, Radwan said, "They have to decide now where they will go in the future, this is a business decision."

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