WE’RE OUT….WHAT NOW?

1 year ago

So the result of the EU Referendum is clear, but what happens next is less clear. Here is a rapid assessment from Good Relations of some implications from the vote, although naturally this is informed guesswork at such an early stage.

Prime Minister

Politics is now moving very quickly with the PM’s resignation. There could easily be 15 candidates putting themselves forward for the leader. Tory MPs will whittle the choice down to two which the Tory party membership will then vote on. The most likely two for many at this stage are Boris Johnson and Theresa May. The winner and the new Prime Minister will be announced at the Conservative conference in October. David Cameron will stay on as caretaker PM until then. One hour in – Education Secretary Nicky Morgan has stated that she is considering a leadership bid.

Divorce Negotiations

It is then likely that Article 50 of the Lisbon Treaty will be invoked by the new Prime Minister, which is a mechanism to start divorce negotiations with the EU. Until our exit is negotiated and agreed, all European rules and laws apply. The UK cannot suspend anything in the meantime that it might not like as Donald Tusk, the President of the EU Council, made clear earlier this morning. This includes no changes to the residency rights of European workers which may be important to organisations with large workforces which may include many EU citizens

What will be of interest to many organisations is the opportunity to re-examine laws and regulations that may adversely affect them in areas currently overseen by the EU. Depending on who you choose to believe, 60-70% of legislation and regulation comes from Europe. This is about to be repatriated back to the UK and therefore trigger an intense period of lobbying.

Conduct of Government

For UK politics in general , government has been gummed up for the past few months as all attention was diverted in to the referendum campaign. Political attention will now be similarly be diverted into the Conservative leadership election, dealing with market turmoil, reaction and repercussions from Europe so one might easily expect there not to be much government until October.

That said, David Cameron will want to push through a few last policies which he regards as connected to his legacy. For example, we have had a number of food clients closely monitoring developments in the Childhood Obesity Strategy. This is a policy area that the PM has been pushing, so it might now accelerate before October, but timing of publication is still really anyone’s guess.

For clients that may have been concerned with the threat from George Osborne during the campaign about an emergency budget with spending cuts and income and corporation tax rises – this will not happen.

The Opposition

Regarding wider political stability –this is very fluid. Jeremy Corbyn will likely come under pressure. Arguably this result was swung by Labour voters in the North and Midlands voting against the party leadership. Compared to the SNP which got out the vote for Remain in the industrial heartlands of Scotland, Labour clearly failed to do this in the English industrial heartlands.

United Kingdom

Nicola Sturgeon has said the Scottish government will begin preparing legislation to enable another independence vote, which they have always suggested if the Scottish vote diverged from the UK result. David Cameron was clear in his resignation speech that he regards last year’s Scottish independence referendum as final. In Northern Ireland, Sinn Fein is now pushing for a vote for a united Ireland.

EU

In short there is the potential for major disruption in the EU. There have already been calls in the Netherlands, Denmark and Sweden to have a referendum on their respective memberships. Far right French leader Marine Le Pen has called for a Frexit vote. If the Netherlands actually voted out, the loss of a founding member of the European project could be fatal for EU.

There are calls for deeper integration, others for more far reaching reform. It is pure guess work to say how Europe will adapt to the Brexit vote, but European media are reflecting a real existential crisis, so more instability in the EU which is already struggling to deal with the debt crisis and migration pressures could create ongoing challenges for organisations with a European perspective.

There was a lot of rhetoric during the campaign about the severity of the European reaction. While there will surely be a lot of angry words directed at the UK, there are major figures trying to calm the waters. Former Commission President Romano Prodi has just been saying words to that effect about the need to establish proper trade deals.

Tony Blair has just been interviewed saying that he thinks it is a good idea that Article 50 is not invoked until the Autumn which provides the opportunity for frayed nerves in Europe to also be soothed. However, general elections next year in France and Germany risk the negotiating positions of the two most important countries hardening which will no doubt add pressure to the UK’s own negotiations.

Opinion Polls

Opinion polls on the day of the referendum got the result wrong. YouGov predicted the exact inverse of the result. Coming after the misleading predications made by the polling industry during the election last year, the industry is in a difficult position and organisations inclined to use polling organisations for projects need to consider how they use insight carefully.

James Hawkins
Senior Consultant, Public Affairs at Good Relations