Speculation that June’s general election will deliver a more favourable Brexit outcome should not lull business into thinking it can take its foot off the gas in preparing for 2019, says Karen Briggs.
Further uncertainty probably wasn’t top of most companies’ wish lists given recent political surprises and the potential for more from Europe this year. Yet news of a snap election in the UK has gone down surprisingly well in the business community. The prevailing opinion among political pundits and based on current polling, seems to be that the prime minister will have the majority she needs to face down those who could obstruct an agreement with the EU. Hopes of an amicable deal are rising: just look at sterling’s march to a six month high this week.
That is very good news for business. It keeps alive the prospect of an orderly exit, continued warm relations with the EU, some sort of ‘phased implementation’ period (or transition) and the hope of a comprehensive free trade agreement at some future point. By shifting the electoral calendar back by two years so the next election is not due until three years after the UK’s exit date in 2019, business has some continuity of policy spanning the pre and post-Brexit periods.
Companies should not use the election as a pretext to delay contingency planning or lose momentum around Brexit however. For a start, even if Mrs May wins the kind of majority that opinion polls indicate, there is no suggestion we will see any change in policy on key pledges such as leaving the Single Market or curbing immigration. A ‘clean Brexit’ firmly remains the likeliest outcome and therefore one which still requires companies to examine all aspects of what that means for their workforces, market access, ability to comply with regulations, access funding and so on.
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Second, businesses should not assume that with extra wiggle room to negotiate, the UK might not still find itself facing a ‘cliff edge’ scenario. In some ways the prospect now is as serious as it was before Tuesday’s announcement. In that context, it would be risky for companies to revert to a ‘wait and see’ approach.
Let me explain why. This time last week, the political calculation for the prime minister was probably that she faced potentially irreconcilable demands from Brussels and euro-sceptics. In that scenario, there was a chance the UK would have chosen to walk away from talks early, perhaps even by Christmas, to give government, businesses and residents in the UK and EU 15 months or so to prepare for exit. The UK would still have faced a cliff, but it would have been a lower, gentler cliff.
Today, working on the presumption that Mrs May gains a handsome parliamentary majority, I think there is a much greater chance she will ditch this defensive strategy and ‘go for it’. The prospect of a deal is naturally good news for business and I remain much more hopeful of a deal today than I was a week ago. Yet ‘going for it’ also carries greater risk of a last-minute failure – the very worst outcome for business as it would have little or no time to make alternative plans.
So for organisations wondering how the election changes things, the conclusion is clear: carry on investing time, money and management focus in preparing for all scenarios – just as before. And if you haven’t already, start now. As has been argued in this column previously, companies cannot under-estimate the size and complexity of the task ahead, nor the danger of a logjam as companies swamp regulators, builders, lawyers, or any other scarce resource, in a last-minute dash to keep the wheels turning. In the most important respect June’s election changes nothing – the exit clock continues to tick: 707 days, and counting.
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders.