One week on from Britain’s momentous decision to leave the EU, things have moved faster than most could have anticipated. Markets have suffered- the UK has lost its AAA rating and more gloom is in store. The two favourites for Conservative Party leadership, Boris Johnson and George Osborne, do not want David Cameron’s job and Theresa May has emerged as the front-runner. The future of the UK – as a political unit as well as its membership of the EU – has never been more unclear. Or at least that threatened to be the case until France and Spain put paid to the idea of Scotland remaining in the EU and instead reprimanded Messrs. Jean-Claude Juncker and Martin Schulz for giving Nicola Sturgeon an airing in Brussels.
For the moment at least, we must assume the UK will leave the EU as electors demanded last week. Of course, many still hope there might be a way out of Brexit – that a combination of regret at a misguided decision, economic turmoil and tough negotiating will somehow reverse the result, and the UK will “remain” in the EU. Of course, if the new Conservative leader were to call a snap election, a Labour Party led by an actually electable leader – let us say David Miliband – campaigning on a Remain ticket could, if successful at the ballot box, simply refuse to ratify Brexit. Today, Theresa May might give assurances to her Base that there will be no election until 2020 if she is elected head of the Conservative Party, but who knows what tomorrow might bring?
So where do we stand today one week on from the referendum? Britain has a lame duck Prime Minister, Scotland is threatening to hold an independence referendum, Sinn Féin is calling for a referendum on a United Ireland, and there is a dearth of real political leadership on all sides of the political divide at Westminster. Neither is there clarity on when Article 50 will be invoked or who will be in the government presiding over negotiations. Across the Channel, no unanimity exists on exactly how conciliatory or tough on the UK the EU27 should be. At least one continental foreign ministry has today suggested to us that, even after invoking Article 50, the UK could change its mind up until the very last day.
On one side of the spectrum, in the run-up to a presidential election, François Hollande needs to show the French electorate that anyone who leaves the EU will pay a dear price in order to deter them from voting for the National Front. “Contagion” from Brexit must be avoided at all cost. Whilst in the run-up to a General Election in Germany, the Finance Minister, Wolfgang Schäuble, stresses the need to learn the lessons of Brexit and confidently asserts that “More Europe” is not the answer to every problem. Of course, Germany fears losing vital trade ties with one if its biggest markets.
Yet there is some agreement on the Continent: all agree that the UK cannot have full access to the Single Market without respecting the “four freedoms”, including freedom of movement. Or do they? Cracks are even appearing on that fundamental principle as Michel Sapin, the French Finance Minister, claimed that everything will be on the negotiating table.
The EU27, publicly, expect the UK to invoke Article 50 the day a new Prime Minister is sworn in – yet several candidates, including frontrunner Theresa May, have suggested the UK may wait until the end of the year before officially beginning negotiations. This delay might allow for some stability to return to the UK’s politics and take the emotional sting out of the debate but drawing out the process might further sour relations with the EU and, perhaps, prolong uncertainty on the markets.
How can businesses protect their interests in such uncertain times? For now, the priority has to be for companies to lobby those who will inform negotiating positions in UK, EU27 and Brussels to make them appreciate the damage hasty, ill thought-through negotiations could bring. They must push for calm, well thought-out negotiations that will lead to the least disruptive situation possible for trade and investment in the long term. A message must be sent to German, French and Italian officials, in particular, that the UK be treated fairly and a constructive approach taken. Companies from the outside Europe, the UK and the EU27 need to come together and collectively leverage political support on the ground in key EU Member States calling for a non-punitive approach to negotiations.
Business must focus on the post-Brexit reality as it stands today: the UK might have been the key opinion former inside the EU on technology, trade and single market issues, but it might be gone tomorrow. Therefore, they must look increasingly to themselves to defend their own interests. If Brexit indeed comes to pass, it will fundamentally change the EU’s internal dynamics. The EU’s biggest champion of free trade and market liberalisation will be gone and more protectionist tendencies remain unchecked. Sadly, unless everyone sees sense, there is a real danger of a “lose-lose” outcome that will only serve to undermine the standing and attractiveness of both the UK and EU27 economies.