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UPDATE 3-Prepare now for over-the-cliff Brexit, German industry says

* German industry looks with concern at Brexit talks

* BDI group says PM May lacks clear ideas

* Industry task force to present proposals by year-end

* Tracking the Brexit Effect http://tmsnrt.rs/2o5MUVS
(Adds comment from Siemens)

By Michael Nienaber

BERLIN, Oct 5 (Reuters) - German firms active in Britain
should make provisions now for a "very hard Brexit", Germany's
biggest industry group said on Thursday, because the government
in London does not know what it wants.

The Federation of German Industries (BDI) said British Prime
Minister Theresa May's government lacked a clear strategy on how
to exit the European Union following last year's referendum.

"After four rounds of negotiations, German industry looks
with concern at the progress of the Brexit negotiations," BDI
Managing Director Joachim Lang told reporters in Berlin. "The
British government is lacking a clear concept despite talking a
lot."

To prepare for a disruptive British departure from the EU,
the BDI said it had set up a task force including major
companies, which trains-to-turbines group Siemens
said it was part of.

This week's annual conference of May's Conservatives showed
her party remained deeply divided over Brexit and that a lack of
strategy was complicating the negotiations with the EU about
Britain's divorce talks, Lang said.

"German companies with a presence in Britain and Northern
Ireland must now make provisions for the serious case of a very
hard exit. Anything else would be naive."

A hard Brexit would mean no agreement with the EU, and
Britain falling back on World Trade Organization rules rather
than being in a tariff-free single market and customs union with
the bloc.

Britain is Germany's third most important single export
destination and its fifth biggest overall trading partner.

"The aim of the task force is to identify potential and
acute risks arising from Britain's departure and to present
constructive proposals for solutions," Lang said.

Sources told Reuters in September that big players such as
Airbus and Deutsche Bank were participants.

Siemens, which employs more than 15,000 people in Britain
including a wind-power joint venture Siemens Gamesa,
said it was joining too. "Obviously we're very interested in
this whole endeavour," a spokesman said.

Germany's VDA automobile association, which represents major
manufacturers such as BMW, is also involved, a VDA
spokeswoman said.

The UK is the second-biggest export market for German car
manufacturers with a value of nearly 29 billion euros ($34
billion). German carmakers and suppliers also employ roughly
9,000 people at 95 production sites in Britain.

The BDI and VDA did not name individual companies taking
part in the task force meetings.

GROWING UNEASE

The industry preparations are the result of growing unease
after slow and acrimonious negotiations so far between Britain's
Brexit minister David Davis and his counterpart at the European
Commission, Michel Barnier.

In Europe's biggest economy, companies are now preparing for
the worst, including the imposition of tariffs and the risk of a
loss of access to London financial markets.

Foreign direct investments from both sides amount to some
140 billion euros and German companies employ roughly 400,000
people in the UK, according to BDI.

The task force, established in early summer, is accelerating
its work in regular meetings in Berlin, Lang said. It is
expected to present conclusions in December and this could also
help shape the position of Germany's next coalition government.

Chancellor Angela Merkel has repeatedly made clear that she
regrets the British decision to leave the EU but that London
should not expect a special deal and that keeping the remaining
27 member states together was more important for her.

Dampening hopes among some Brexiteers that London could
succeed in driving a wedge between governments and companies in
other European countries, Lang said German industry fully backed
the EU's negotiation strategy.

"To make it clear: Yes, German industry wants to keep a very
close relationship with Britain. But have no doubt: We
prioritise the further development of the EU," Lang said.

"The ball now lies in Britain's court. The speech by the
British prime minister in Florence two weeks ago by no means
brought the clarity that had been hoped for," Lang said,
referring to May's attempt to speed up negotiations.

European Commission President Jean-Claude Juncker said on
Tuesday that the fourth round of negotiations did not produce
enough agreement for the EU to yield to May's demands for
immediate talks on a free trade deal and a transition to it
after Brexit.
($1 = 0.8519 euros)
($1 = 0.7613 pounds)
(Additional reporting by Andreas Cremer and Georgina Prodhan;
Reporting by Michael Nienaber Editing by Jeremy Gaunt)

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