German SMEs took a fairly calm view of the Brexit referendum

German KfW-ifo SME Barometer, sampled in the weeks before the Brexit referendum on June 23 rose to a new year's high in June (climbing by 0.9 to 16.3 balance points). SME business expectations rose by 1.8 to 5.7 balance points. SMEs' assessments of the current business situation remained stable in June at a two-year high of 27.0 balance points.  In the second quarter as a whole, they improved by 1.7 points compared with the average of the first quarter.

For the first time this year, a majority of large enterprises also signalled almost the same mood tendency in June. Their assessments were likewise virtually stable (down 0.1 to 18.3 balance points), while their expectations improved even more strongly than those of SMEs (up 4.4 to 2.4 balance points).

June's upbeat mood suggests that German companies are well equipped for uncertain times ahead. The upcoming months will be characterised by great uncertainty and a weaker economy – particularly in the UK but also in the rest of Europe.  Therefore expectations and hence the business climate will deteriorate significantly, at least in July.

"In view of the Brexit decision, we have officially revised our economic forecast. We now expect the German economy to grow by only 1.5 percent in 2016 (previous forecast: 1.7 percent) and 1.2 percent in 2017 (previous forecast: 1.8 percent),” said Kfw research in a note.