Having set out on the eve of poll what next if we voted Brexit, we ask what now for businesses and organisations struggling to adjust to this brave new world. Atlas Partners offers you a check list of questions to ask internally, as well as an update on the latest developments in the fortnight since the referendum.
EXPECT THE UNEXPECTED
The only thing that is certain in the next six months in uncertainty. Whilst many have rushed to seek legal opinion, the situation we face is without legal precedent. It is political decisions that will set the mandate for negotiations and answer legal questions about when they will begin, how we will place all our existing EU laws on a new UK footing, what support vulnerable industries can expect in the interim, and if talks on future and global trade can possibly take place in parallel.
That means that legal advice needs to be supplemented with political counsel, close scrutiny of the fluid landscape and flexible communication and engagement plans. As demonstration of just how fluid events can be – this morning Andrea Leadsom pulled out of the Conservative leadership election – meaning Theresa May is our de facto new Prime Minister, news of which saw an immediate recovery in sterling. The ongoing Labour civil war, where Angela Eagle has now declared her leadership bid, means that we do not have an official opposition to provide effective scrutiny or an alternative view in the meantime. However, the wheels of the civil service bureaucracy are already turning towards making ‘Brexit’ a reality. Whether Article 50 negotiations begin sooner or later, there is a huge web of legislation and practical implications to be worked through to present the new Prime Minister with clear policy options. It is vital that industries engage in the evidence-based policy process that is now underway.
In ironic confluence with Chilcot’s pronouncements on the Iraq War last week, we discovered afresh the critical importance of post-conflict contingency planning. Headline grabbing Leave campaigners (all now resigned from leading roles) as it turns out had no plan of their own. Beyond the Bank of England and Treasury contingency plans for the financial markets, the Government didn’t have one either.
So the challenge for our new Prime Minister will be to forge consensus from the disparate interest groups that made up the Leave campaign and those of Remain, to form that plan. This is no insignificant task. The voices of those who want to see more control of immigration need to be heard, the concerns of those who see access to the single market as a key foundation to our continued prosperity will need to be answered. This will require much more honesty about the trade offs that will have to be made. It is not unrealistic to predict a backlash from both Leave voters, discovering that gains in sovereignty may involve painful economic trade offs, AND from Remain voters, fighting to preserve single market entry at the cost of more aggressive border controls.
BREXIT OR BREXISH?
There are competing options for how the referendum verdict should be implemented. For want of better descriptions we’re calling these ‘Brexit’ and ‘Brexish’ respectively, with key differences on invoking Article 50 and the balance between access to the single market and accepting the free movement of people.
Our de facto Prime Minister, Theresa May, has said “Brexit means Brexit” but also that she believes “It will be a priority to allow British companies to trade with the single market in goods and services”. However, there will be no deal “that involves accepting the free movement of people as it has worked hitherto”. This indicate that she could try to strike a deal with EU counterparts to reform the free movement of people – something that David Cameron failed to do during his renegotiation. She has held back on providing certainty for EU workers currently living in the UK – by linking it to guarantees for UK ex-pats in the EU. “But of course as part of the negotiation we will need to look at this question of people who are here in the UK from the EU”.
Leave campaigners (including Andrea Leadsom) argue that not everything has to be sorted out before or during Article 50 negotiations, that a quick deal with “transitional arrangements” gives us certainty and then plenty of time afterwards to repeal, transpose and reform the parts of EU Law that we want to keep. However, Theresa May has said we shouldn’t begin negotiating before we know what we want – hence her proposal that we should delay in notification until at least 2017.
Crudely, our new PM faces a choice between joining EEA or EFTA, paying similar contributions, accepting the rules, without a seat at the table to debate them or negotiating a ‘free trade’ deal, all of which could create customs, tariffs and IP challenges for UK industries. The Institute for Government sets out the myriad options in more detail here. Jonathan Hill, the UK’s former EU Commissioner, said before the referendum “As the person who is responsible for helping to draw up the rules for Europe’s financial services, one thing is clear to me: if the UK were to vote leave, it’s fantasy to suggest it could quickly secure access to the single market on the same terms as it has today.”
Our final settlement is most likely to be an ugly political compromise that has to bridge the gap between perception and reality – can it be sold to the electorate but allow sufficient flexibility in implementation? Leading Leave campaigner and policy thinker, Daniel Hannan MEP believes we can square the circle.
If there is a third way that can be found in the next few months it will be down to the efforts of some key people you have probably never heard of, including Olly Robbins in the Cabinet Office and Tom Scholar in HM Treasury, to whom we will return in a forthcoming blog. They are tasked with identifying the skills gap, driving the consequential recruitment and ultimately presenting our new Prime Minister with the scenario plans and costed options from which she will determine the UK’s negotiating mandate.
WHAT THE NEIGHBOURS THINK?
The current primary concern of EU leaders is managing contagion, not allowing ‘Brexit’ fever to ignite anti-EU nationalist outbreaks in other Member States. Pierre de Boissieu, former French Ambassador to the EU speaking before the referendum said a vote to leave would see the remaining 27 members move to strengthen their mutual ties and when it came to the UK that “sympathy and friendship are not the same as policy”.
Last Tuesday, Donald Tusk tweeted that while the EU “wishes UK as close partner. Access to single market means acceptance of all 4 freedoms. No single market à la carte” clearly stating that without acceptance of free movement of capital, goods, services, and most importantly people, access to the single market would be denied. The German chancellor, Angela Merkel, has echoed the EU council president, reiterating that if Britain wants to maintain single market access, “there will have to be trade-offs elsewhere”. It remains to be seen whether UK negotiators can find some wriggle room here or not.
Leave campaigners before the referendum result asserted that Article 50 was not the only option to negotiate ‘Brexit’. The rapid reaction of the other Member States - that there will be no negotiation before this trigger point - has narrowed the UK’s options. While Francois Hollande said the new British Government must invoke Article 50 as soon as it is formed in early September, Ms Merkel has adopted a more patient approach. We should anticipate that this will not be the last time our choices are restricted by the reaction of our neighbours: this is a negotiation and as time ticks away, more power will be vested in the remaining Member States.
There is some debate about whether the negotiating mandate will be set by the 27 Heads of Government, and passed to the Commission to action before returning for approval, or whether the European Council will drive the process throughout. For businesses seeking to track and influence the process that means engagement in Brussels and in key European capitals will both be advisable.
IS THERE A GET OUT OF JAIL FREE CARD?
This is a question many have asked us in the two weeks since the vote. We have debated it ourselves and with our most politically insightful friends and contacts. There remains (no pun intended) a remote possibility of parliamentary rebellion over ‘Brexit’ measures or political opportunism could trigger a General Election before 2020, which in turn could produce a new pro-EU democratic mandate for Government.
In our judgment however, this is just wishful thinking from those who are yet to come to terms with the ‘Brexit’ vote and the brave new world we find ourselves in. If you are struggling to keep pace with the changes since the referendum Atlas Partners is on hand to help provide insights, updates and more detailed analysis.
Above and beyond your business as usual public affairs engagement, what can you do now? Based on our discussion with officials, clients and contacts, we’re sharing the below practical tips for businesses and organisations that now find themselves playing catch up.
1. Quantify your exposure:
a. Conduct a regulatory audit so that you know which Brussels based Directives and Regulations are critical to your business and industry, which you’d prefer to see reformed and any that you would want repealed. Can you provide robust data about potential time and cost savings?
b. Scenario plan for the different future trading options and identify key indicators that can be shared with civil service teams who are modelling impacts over the next few months. What facts can you share about costs, tariffs, IP and funding streams that might be threatened by ‘Brexit’?
2. Activate your Trade Association memberships:
a. Government officials will want to see industry wide positions and metrics to inform their prioritisation and economic modelling. Does your trade association have the tools, capacity and data to supply this on your behalf? Do you need to supplement their resources with secondees from your internal team or additional agency budget?
b. As with the Treasury, the Brexit Unit are already citing a preference for industry engagement via trade associations and representative bodies. That means your memberships should provide useful intelligence and access to key officials. If you haven’t already been invited to meetings to discuss this, consider whether your trade association is engaging effectively?
3. Align your position in the UK with European counterparts:
a. If you don’t already have existing relationships in Brussels and in member state capitals, you should consider reaching out to counterparts who are likely to share your concerns about uncertainty and industry policy.
b. Where possible discuss and agree your policy positions with counterparts so that their submissions to EU/Member State negotiating teams demonstrate common ground. Agreeing quick wins will be important on both sides of the negotiation, could your policy area be easily resolved?
4. Consider stepping up your direct engagement:
a. Monitoring media and official sources will only provide you with a certain level of information, direct meetings will elicit better intelligence and insights about what you need to do next. They will also allow you to share commercially sensitive information, outside of your trade association engagement.
b. Any existing stakeholder matrix will need to be updated and extended to include the growing team of politicians and officials who will be developing our negotiating position, and those in Parliament who will be scrutinising their progress. Look out for our next blog on the men you’ve never heard of who will shape our future relationship with the EU.