BREXIT –WHAT NOW, WHAT NEXT? - …...2 | BREXIT – WHAT NOW, WHAT NEXT? Nick Charalambides,...

BREXIT – WHAT NOW, WHAT NEXT?

The UK’s withdrawal from the European Union will not happen

immediately, with the two-year timetable for Brexit only starting

when Article 50 of the Lisbon Treaty is formally invoked. This is

unlikely to happen until the Conservatives appoint a new leader. Even

then, the decision to formally begin that process might not be taken

straight away. In the meantime, David Cameron, Boris Johnson, Mark

Carney and others have all stressed the need for a calm, rational and

measured approach to decision making. Any talk of an emergency

budget, for example, has been notably absent (though early

speculation has begun about the possibility of a general election in

November once the Conservatives have a new leader).

Crucially, between now and exit, the UK government will not stop

developing and implementing policy. We should not expect a hiatus

or a political vacuum to develop in Westminster, Holyrood, Cardiff or

Stormont. Understanding the shifting dynamics will be vital in

ensuring business’s voices can be heard in the new political

environment.

Westminster Advisers’ has prepared this briefing document to help

guide your thinking in the first hours and days of the post-

referendum world.

STAKEHOLDER REACTION The leaders of the EU institutions are very clear that they want

negotiations on the UK’s exit to start ‘as soon as possible’. This runs

contrary to the hopes of most of the UK political class. Language is

already turning to ‘27 Member States’, making it clear that the focus

is on a stable future for the EU without the UK. Nationalist groups

across the continent have expressed jubilation at the UK’s decision

and renewed hope of their own referenda. Sweden, Hungary, the

Netherlands, France and Italy, amongst other EU members, are all

now facing calls from a variety of groups within their countries to

look closely at their own membership.

Commission President Jean Claude Juncker, President Tusk, President

Schulz and Prime Minister Rutte (Dutch PM representing the Dutch

Council Presidency) said:

“We now expect the United Kingdom government to give effect to this

decision of the British people as soon as possible, however painful that

process may be.”

The business community has called for immediate action to stabilise

markets with concerns over liquidity and currency risks top of the

agenda. On the process for leaving the single market, companies are

looking for a slow and considered approach to ensure all possibilities

are accounted for and the eventual deal retains Britain’s competitive

position.

CBI Director-General, Carolyn Fairburn, said:

“The urgent priority now is to reassure the markets. We need strong

and calm leadership from the government, working with the Bank of

England, to shore up confidence and stability in the economy.

“The choices we make over the coming months will affect generations

to come. This is not a time for rushed decisions.”

'IMPLICATIONS FOR LABOURThe failure to convince traditional Labour voters in post-industrial

regions to vote remain has been blamed on Corbyn’s lacklustre

A BRAVE NEW WORLD News that the UK had voted to leave the European Union set off a domino effect across Westminster, the

devolved nations, Europe and the rest of the world. The political, social and economic implications of the

decision will be far-reaching and long lasting.

2 | B R E X I T – W H A T N OW , W H A T N E X T ?

Nick Charalambides, Account Executive: “Having previously worked in Brussels, I know what a systemic shock this will

have been to the EU. Calls are already coming from the European Parliament to invoke Article 50 immediately. Donald Tusk

and Jean-Claude Juncker have echoed these sentiments. The EU has little incentive to wait until October, when a new UK

Prime Minister is in place, to start formal negotiations.”

Lizzie Wills, Associate Director: “The Athens stock exchange fell 15 per cent immediately this morning after opening,

while bank shares fell 30 per cent – the maximum permitted before trading is suspended. The remaining 27 Member States

will want to stem any contagion which may pave the way for Grexit. A punitive stance could conceivably be taken towards

Britain to discourage any replica membership referenda. The European Council summit next week will give a clearer

indication of where Member States and the Union as a whole stands.”


campaign. His position is now in serious doubt. Two MPs have

publicly called for a vote of no confidence, there are reports that at

least 55 MPs will follow next week, and an unnamed shadow cabinet

minister told press “It’s now a choice between the survival of the

Labour Party or Jeremy Corbyn’s leadership”.

His support amongst the membership is also likely to be at least

partially damaged. Recently joined “Corbynites” are unlikely to

abandon their support entirely. Some distrusted the capitalist EU and

many are now more concerned with Blairite attacks. However, for

those on the soft left – members of the party who switched from

Miliband to Corbyn – Britain’s exit from the EU will be a major

concern.

The biggest problem for the Labour party, though perhaps not the

most dramatic, is the split this referendum has demonstrated

between the leadership and Labour’s traditional base. If Labour is not

able to reconnect with its base, or build a new coalition of support,

this referendum may be seen as the beginning of the party’s long

term decline.

The main beneficiary of this long-term decline in Labour’s traditional

heartlands is likely to be UKIP.

POTENTIAL CONSTITUTIONAL IMPLICATIONSAlongside fears that Brexit would tear Europe apart, commentators

correctly predicted that a vote to leave the EU would have lasting

ramifications for the unity of the United Kingdom itself.

Today’s result has revealed a deep divergence between opinion in

England and Wales versus Scotland and Northern Ireland, and

London versus the rest of England. We are already starting to see the

impact of this, with Scottish First Minister Nicola Sturgeon quick to

call for a second Scottish Independence referendum, while Sinn Fein

calls for a ‘border poll’ on a united Ireland.

The results for each of the UK’s devolved administrations are as follows:

• England: Leave 53.4%, Remain 46.6%

• Wales: Leave 52.5%, Remain 47.5%

• Northern Ireland: Leave 44.2%, Remain 55.8%

• Scotland: Leave 38.0%, Remain 62.0%

Scotland

Scotland voted decisively to remain in the EU by a margin of 62% to

38% on a turnout of 67%. First Minister Nicola Sturgeon has

announced that Scotland being taken out of the EU would be

“democratically unacceptable" and that a “second referendum is on

the table” given the ‘significant material change’ in in the settlement

between Scotland and the rest of the UK.

Ms Sturgeon has also made clear the preparation of legislation will

begin now to allow MSPs to vote on the issue within the two year

negotiation period once Article 50 is invoked. The SNP would likely

have the votes at Holyrood to pass a Bill – relying on the support of

the Scottish Green Party, which supports independence.

Despite this, only the UK government can legislate for a second

referendum by convention following such a vote.

The SNP did not have the option of a second referendum in their

manifesto which many would argue means they don’t have the

mandate.

The SNP will be at the negotiating table with the UK government

once this begins in earnest.

Gibraltar

There is no region with more interest in Britain remaininga part of

the EU than Gibraltar so this result will have dramatic implications

for the Rock. Gibraltar's Chief Minister campaigned in support of

Dean Duke, Account Manager: “Looking at the domestic agenda, childcare policies have been a core part of the

Conservatives’ offer to voters under David Cameron’s leadership. Childcare has been used to broaden the Conservatives’

appeal to young families and women voters, and formed a key plank of the party’s “plan for every stage of your life” at the

last election.

The government, however, has been struggling to deliver its key pledges in this area. The necessary legislation has been

passed, but nurseries have warned that the 30 free hours of childcare for 3 and 4 year olds is severely underfunded and that

they’re not all in a position to extend beyond the 15 hours already available to parents. Tax-free Childcare, which will

provide a 20% top-up to parents’ childcare contributions, has been delayed and government forecasts estimate that only

half of eligible families will sign up for the scheme.

Both of those schemes are in addition to the childcare element of Universal Credit and the existing childcare vouchers

scheme. The childcare policy landscape is overlapping and complicated. Expect leadership contenders and future ministers

to take a look at how over £6 billion of spending on childcare can be put to best use through a clearer offer.”


Remain and in the end 95.9 per cent of the population opted to stay

in the union. Commuters from Spain make up about half of the

territory’s workforce so any delay in border crossings severely harms

the economy. Gibraltar’s existence as a British Territory is also under

threat. Following the leave vote Spanish Foreign Minister José

Manuel has called for co-sovereignty of the island, saying “the

Spanish flag on the Rock is much closer than before”. For Gibraltar’s

denizens this vote may determine not only the region’s relationship

with the EU, but its very existence.

Northern Ireland

Britain and Ireland operate a Common Travel Area (CTA) that

precedes their membership of the EU. The travel zone, which also

includes the Isle of Man and Channel Islands, enables the free flow of

people, goods and services.

The future of the CTA is now in question. Leave campaigners,

including the Secretary of State for Northern Ireland Theresa Villiers,

had denied that a ‘hard’ border would be imposed between Ireland

and Northern Ireland. That will now form part of the exit

negotiations, and it is far from clear that the EU is willing to have an

open border with a non-member state.

For its part, the Irish Government has stressed the importance of

minimising disruption, and will advocate for a ‘soft border’ solution

within the EU tent.

Like Scotland, the Remain vote within Northern Ireland has raised

questions about the future composition of the UK. Deputy First

Minister, Sinn Féin’s Martin McGuinness, has called for a referendum

on Irish unity, which could risk inflaming sectarian tensions.

Ireland’s Taoiseach has already rejected that call, stressing that there

is no evidence that the majority of the population in Northern

Ireland want a referendum and that there are more pressing

concerns to address. Theresa Villiers, Secretary of State for Northern

Ireland, has already ruled out the possibility of a referendum.

WHAT THE FINANCIAL MARKETS ARE DOINGWith sharp falls in early trading, the pound saw its biggest losses in

30 years and the FTSE 100 dropped over 500 points. Around 10am

we saw a slight recovery despite the resignation announcement

from the PM. Banks were hit particularly hard, some falling by 25%.

This poses big questions for the government’s disposal of their

substantial remaining holdings in Lloyds and RBS – this could have

serious impacts on the fiscal position. Government bond yields

(including the UK) plunged and gold shot up as investors looked for

somewhere to weather the storm of prolonged uncertainty.

Initial concerns about wider contagion were somewhat ameliorated

by the opening bell on Wall Street, with only a small downward shift

in the Dow Jones.

Jessica March, Account Manager: “I specialise in health and social care policy and the economic impact from Brexit could

be huge in terms of available funding for the already fragile NHS. The relatively generous settlement outlined in the

spending review 2015 was dependent on continued economic growth so providers in the sector may have to revise their

financial forecasts. The NHS arms-length bodies offer much-needed stability as they will remain in place and continue to

drive policy at a national level.”

Marc Woolfson, Director of Investor Services: “Whilst this result is clearly something of a political and economic

earthquake, there is need for calm and considered analysis of the implications for the UK investment climate. In the short

term not a great deal will change, once the markets have recovered from their initial shock. But looking longer term the

impact of changes in policy on business’s labour market supply, access to capital from foreign direct investment, and

exposure to cross border supply chains, will be key considerations for any investment thesis.”

Simon Darby, Account Director: “The fallout from the EU referendum will create extensive uncertainty for UK

infrastructure. Large housing-developers have already taken a hit on their share-prices. The decision to leave will likely

impact the willingness of investors to finance infrastructure projects, at least in the short-term.”


NEXT STEPSAs a totally unprecedented scenario, it is currently not fully clear

what all of the next steps are. Similarly this is unlikely to be a process

over which the UK government has total control. The reactions of

European institutions, opposition political parties, and overseas and

devolved governments will partially determine what happens next.

However, we currently expect the following to take place over the

next week:

• Speculation regarding potential ‘runners and riders’ for the

Conservative Party leadership will escalate throughout the

weekend and sentiment in the party about key contenders will

emerge.

• Over the weekend business will continue to be pressed for their

reaction and the implications for their investment and staffing

plans.

• A timetable for the Conservative party leadership contest will be

set out likely early next week, with a meeting of the Cabinet

taking place on Monday.

• The UK Parliament next sits on Monday and there is likely to be a

statement or Urgent Question at which the Prime Minister may

set out further details on the renegotiation process.

• Leader of the Opposition Jeremy Corbyn will face pressure over his

position, and potentially a Vote of no confidence, at the

Parliamentary Labour Party (PLP) meeting on Monday evening.

• Nicola Sturgeon will deliver a statement to the Scottish

Parliament on Tuesday on the next steps that she intends to

pursue.

• There is likely to be an emergency session of the European

Parliament on Tuesday, at which there is likely to be pressure from

across Europe for Article 50 to be enacted immediately.

Beyond these immediate timescales, the following will happen:

• The Conservative party leadership contest continues throughout

the summer with the result announced at the Conservative Party

Conference in October.

• There is the potential for a Labour Party leadership contest to take

place over the summer.

• We will establish whether there is momentum for a general

election to be called following the election of a new Tory party

leader. The Fixed Term Parliaments Act makes it somewhat

complicated to simply call a new election, but not by any means

impossible, should a new Conservative leader either want or feel

forced to have one.

BREXIT TIMETABLE: 2016 - 2018

Today - 24th June

• Votes are in. Leave has won the referendum by 52% to 48%.

• David Cameron announced he will resign as Prime Minister after a “period of stability”.

• Labour MPs Margaret Hodge and Ann Coffey tabled a ‘no confidence’ motion in Jeremy Corbyn, ahead of Monday’s scheduled

meeting of the Parliamentary Labour Party.

• The EU’s top leaders have said they expect the UK to act on its momentous vote to leave the union “as soon as possible, however

painful that process may be” and that there will be “no renegotiation”.

• The presidents of the European council, commission and parliament – Donald Tusk, Jean-Claude Juncker and Martin Schulz

respectively – and Mark Rutte, the prime minister of the Netherlands which holds the EU’s rotating presidency, said any delay to

Britain’s exit would “unnecessarily prolong uncertainty”.

Saturday 25th June

• The foreign ministers of the founding six member states – France, Germany, the Netherlands, Luxembourg, Italy and Belgium –

will meet to discuss the implications of the British vote.

Monday 27th June

• Meeting of the Parliamentary Labour Party where it is decided whether Jeremy Corbyn will be “no-confidence”.


28th - 29th June

• European Council summit – EU leaders are due to gather for a summit in Brussels. Cameron will be under intense pressure to

activate Article 50 and commence exit negotiations. Cameron has said he wants to wait until the new Prime Minister comes into

post by October 2016.

8th – 9th July

• Warsaw NATO Summit 2016

21st July

• Summer Parliamentary recess begins

Summer 2016

• Campaigning begins for a new leader of the Conservative Party (the new Prime Minister) for election by the Conservative Party

Conference at the beginning of October 2016.

September 2016

• Parliament return after recess

2nd October 2016

• Conservative Party Conference – new Conservative Party leader (and Prime Minister) to be in place.

20th – 21st October 2016

• European Council summit

After October 2016 (TBC)

• David Cameron’s aim is that after the new Prime Minister is in post, negations will begin between the UK and the EU.

• Two teams will be created with the new Prime Minister deciding on who will represent the UK. The EU side is likely to be headed

by one of the current Commissioners.

November 2016

• Potential UK general election

After October 2016 (TBC)

• Following negotiations, the UK will need to trigger Article 50. This could take months or years. Triggering Article 50 formally

notifies the intension to withdraw and starts a two-year clock running. After that, the Treaties that govern membership no longer

apply to Britain. The terms of exit will be negotiated between Britain’s 27 counterparts, and each will have a veto over the

conditions.

15th – 16th December 2016

• European Council summit

July-December 2017

• United Kingdom presidency of the Council of the EU will only apply if the UK has not triggered Article 50 of the Lisbon Treaty.

Once Article 50 is invoked, the UK loses its EU voting rights.

October-November 2018 (approx.)

• The UK formally leaves the European Union.


Initial speculation about who might put themselves forward

for the Conservative leadership

David Cameron’s confirmation during last year’s General Election

that we would not seek re-election in 2020 generated a plethora of

speculation over who could take his place. His resignation this

morning has, unsurprisingly, elevated speculation to fever pitch.

It’s easy to divide potential candidates according to their stance on

Brexit. It’s likely the looming leadership contest will be fought along

these lines as the party membership tries to settle its historical

divide.

Lists of names on both sides are lengthy. In the leave corner we have

the favourite, Boris Johnson. One of the few certainties in the post-

Brexit world is that he’ll announce his bid in the coming days. Other

names include:

• Liam Fox - A long-time Eurosceptic and former Defence Secretary,

Fox is well-liked among backbenchers and party members,

particularly those supportive of leaving the EU.

• Priti Patel - Patel’s ascendance within the government has been a

rapid one, having become an MP in 2010. Her position to the right

of the party may stand her in good stead with some parts of the

Conservative grassroots.

• Andrea Leadsom - Leadsom has over 20 years’ City experience

and is a close ally of George Osborne, having worked closely with

him whilst in the Treasury. Despite her current energy brief, she’s

recently penned commentary pieces on platforms such as Con

Home about other policy issues. Could this be a sign of early

positioning as a candidate?

• A question mark hovers over Michael Gove. He is widely

recognised within Conservative party as a mighty intellect and is

well liked, even among pro-Remain Tories. However, he has never

expressed appetite for the leadership and is likely viewed as being

most effective in behind the scenes policy deliberation. It may be

that post-October, we know him as Chancellor Gove.

In the Remain camp, George Osborne was for a time an obvious

choice, but no longer. His ownership over the ‘long term economic

plan’, policy agendas like the Northern Powerhouse and ardent

support for Remain have positioned him as the de facto

Cameroonian continuity candidate. This compromises him, as does

his high-profile U-turn on tax credits and failure to meet his own

economic targets. Accordingly, the bookies have him at 20/1,

compared to Boris’s 5/4. Other remain candidates include:

• Theresa May – With her record as longest serving Home Secretary

since 1892 and her steely disposition reminiscent of Thatcher,

May is a real contender for the leadership. She has not cultured a

following within the parliamentary party however, which could

hurt her chances when it comes down to selection. This might be

mitigated by her pragmatic Euroscepticism, which endears her to

the Conservative grassroots despite her support for Remain.

Angus Hill, Account Manager: “In my work in the energy sector, the impact from Brexit is largely likely to focus on

investment decisions. With a need for investment in generation in the UK, investors and developers will need to look closely at

changes in emphasis on energy policy. There remain separate questions to be answered as to whether the UK will continue to

participate in the EU Internal Energy Market. With current Secretary of State Amber Rudd being a leading Remain voice there

will be questions as to her future within government, and the impact that this could have on energy policy.”

Fiona Elliott, Senior Account Executive: “In England, what is most striking is London’s isolation. People have grumbled for

a long time about the political and cultural separation between the capital and the rest of the UK, something that today’s

result has thrown into sharp relief. With the City of London facing an uncertain future over its status as Europe’s financial

capital, keep a close eye out for the emergence of a new London-centric political movements that celebrate its distinction

from the rest of the country.”

Joseph Jones, Account Executive: “I am an active and committed Labour Party member (though not a Corbyn fan). The

poor result in this referendum hints at deep worries for Labour. The Party leadership has once again demonstrated a

disconnect from traditional Labour supporters, with many more voting Leave than expected in post-industrial towns. In order

to survive, the labour party will have to work out how to reconnect with these voters and come to a new settlement on issues

like immigration. While Corbyn coup plots are exciting and good for live news, this is the real challenge for the party.”


Helen Roberts, Account Director: “My personal reflection is that David Cameron’s resignation as Prime Minister and

Leader of the Conservative Party will not have come as a surprise following his defeat in this referendum – although it will be a

disappointment to many One Nation Conservatives. Cameron’s emotional speech on the steps of Downing Street in part

reflects his disappointment that the result will affect his legacy. As a party activist for over a decade, I hope that in the long

run, he will be remembered for being a progressive Conservative leader who made significant reforms to the party. Under

Cameron, Britain became the fastest-growing western economy, taxes were cut for the poorest workers, many more BME and

female Conservative candidates were elected, gay marriage was pushed through Parliament and the Conservatives won their

first parliamentary majority in two decades.”

• Nicky Morgan – Morgan’s team has already sprung into action,

with reports today that she is considering making a run. Time will

tell what her ‘pitch’ will be. To date, it’s not been particularly clear.

• Ruth Davidson – After a stirring performance in the BBC’s

referendum debate and her storming success in the recent

Scottish elections, many have pointed to Davidson as a leadership

candidate. She’s been clear, however, that her priorities lie in

Scotland, so we may not see her run this time.

• Stephen Crabb – The recently appointed Work and Pensions

Secretary is seen as a moderniser and has been well received in his

new role. However, questions might be raised over whether he has

the experience to be Prime Minister. It’s worth remembering

though that at 43, Crabb is the same age as Cameron was when

he became Prime Minister.

Rebecca Brake, Senior Account Manager: “Brexit presents a number of potential risks and policy changes. From schools

to HE there is a clear potential impact on staffing, at a time of teaching shortages. This impact also translates to EU student

access to UK universities. The impact on the significant research funding received from the EU will undoubtedly also be a

focus for the HE sector.

For schools there have been concerns that important policy developments, such as the National Schools Funding Formula

will be subject to changes arising from shifts in Conservative thinking. In the skills sector, the main focus is the

apprenticeships levy, following previous comments by Skills Minister Nick Boles that this may need to be postponed should

Brexit lead to a recession, as well as the impact on training funding from the European Social Fund.”


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