Implications for business of Brexit – British exit from the EU following the 23rd June referendum

There will be huge implications for business if Britain exits from the EU following the 23rd June referendum.

The date has been set, the main political players have chosen sides, and the opinion polls are volatile. The outcome of the referendum vote is very unpredictable at this stage and UK businesses should start to prepare. Some effects will be felt immediately, such as potential impact on the markets, currency volatility, and an impact on business and consumer confidence. Your communications internally and externally, both leading up to and immediately following the referendum, will be critical to managing the effects on your business.

If the UK votes to leave the EU, the Government would start exit negotiations under Article 50 of the Lisbon Treaty. This allows for a two-year negotiation, extendable by mutual consent. In all likelihood it will actually take many more years for the various new arrangements to be finalized both with the EU as a whole and with individual nations within an outside the EU.

These are the critical issues:

  • Single market: Access to the single market is the most important Brexit negotiating point. The UK Government would seek to negotiate terms for continued market access but this will be subject to requirements to adhere to rules and adopt laws that have an equivalence to those that apply to EU member states. These may apply to contracts, employee relations, data protection, IP, financial markets, competition law, tax, passporting, and many others. The UK would seek a unique set of arrangements but there are precedents to draw on. Norway, for example, is outside the EU but is in the European Economic Area. They have full access to the single market but with a requirement to adopt all EU standards and regulations. Turkey has a customs union that means internal tariff barriers are avoided in return for a requirement to adopt many EU regulations and to implement EU external tariffs. Switzerland has a sector-by-sector approach to free trade agreements that give access to markets but require them to follow regulations.
  • Free movement: Immigration is a key issue both in terms of the implications for the 1.4 million UK citizens living in the EU and for EU citizens in the UK. It is unclear what transitional or long term arrangements would be made in the event of Brexit. Free movement of labour in the EU has given many British businesses the opportunity to blend UK and international talent in the workforce. Whilst the scale and pace of migration to the UK from the rest of the EU in recent years has proved controversial in terms of public opinion, free movement has generally been supported by British business.
  • Trade deals: The UK, outside of the EU, would be free to set its own trade and investments policies and priorities, and negotiate trade deals. ‘Out’ campaigners argue that this will be beneficial for the UK and open up new markets and opportunities. This may prove more difficult in practice as the UK seeks to negotiate with the rest of the world on its own, rather than as part of the EU. The UK will also find itself less able to influence negotiations between the EU and the rest of the world on regulations and standards in the single market, whilst still being required to adhere with them as part of any future terms of trade between the UK and the EU.
  • Employment laws: Many employment laws in the UK stem from the EU, particularly from the social chapter. Some business voices and politicians will push the Government to reform these, while unions would oppose a weakening of employment protections.
  • R&D: Innovation in the UK has been boosted by significant EU funding for R&D channeled towards businesses and universities. The UK currently receives more funding from the European Research Council than any other country and 50% more than Germany. This funding would be lost in the event of Brexit and may not be replaced by the UK government. It is notable that the Minister for Universities and Science, Jo Johnson, is strongly campaigning for an ‘In’ vote, in contrast to his brother Boris.
  • Environment and Energy: The UK Government will be free to decide on whether to lower, raise or maintain current environmental requirements in areas such as air and water quality, emissions and waste. An EU exit would not remove legally binding UK climate targets under the Climate Change Act 2008, although it could increase focus on all aspects of UK based generation. The security of energy supply could be affected through decreased interconnectivity to Europe and reduced harmonisation of EU energy markets.
  • EU budget: As a net contributor to the EU budget the UK will make a saving of around £9.8billion, although this will be partially offset by a reduction in support from the European Regional Development Fund and the European Social Fund for parts of the UK. EU funds are mostly targeted at business, particularly for the purpose of job creation. If the UK government finds it has net additional resources after exiting the EU there is no guarantee these will be directed towards business. It may choose instead to prioritise deficit reduction and funding public services.
  • Consumer policy: Significant UK consumer protection regulation is derived from the EU and this may be reformed. For example, directives implemented in the UK protect consumers from unsafe products, unfair practices and misleading marketing practices.

Connect Communications can help you to prepare for the EU referendum and possible Brexit with a full EU referendum audit to review and advise on your strategy and communications. We can also offer specific support in relation to the EU referendum, such as strategy sessions with your Board and senior team, bespoke internal training, message development, articles, speeches and briefing papers. If you would like to discuss this please contact Andy Sawford, Chief Executive of Connect on a.sawford@connectpa.co.uk


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Andy Sawford