Ex No 10 insider: The hidden impact of Brexit on business

While attention will rightly fall on trade negotiations this year, there could be longer-term domestic implications of the UK's political realignment.

by The Lobbyist
Last Updated: 10 Jan 2020

Jacob Rees Mogg is right to say that it will take 50 years to tell whether or not Brexit has been a success, though if history is anything to go by this may be a conservative estimate - when Henry VIII broke from the dominant power in Europe it took 150 years for the conflicts that were unleashed to be reconciled in the Glorious Revolution.

For businesses it makes for an uncertain time, only marginally less than last year when it still wasn’t clear whether Brexit would happen suddenly or gradually, or even at all. Most attention falls on the upcoming trade negotiations between the UK and the EU, which may or may not be resolved this year, and which will set the parameters for Britain’s negotiations with the United States and other blocs for the next decade. 

Clearly this could have huge implications, particularly for larger businesses that rely on import and export markets, but there are other, subtler changes that we may only fully realise decades down the line once the dust has settled from the political realignment we witnessed in the general election.

What’s changed in politics

The big losers in the last election were voters in Scotland and Northern Ireland - who have little part in Government or prospect of influence during the next Parliament at least - plus cosmopolitan, socially liberal London and like-minded big cities, the much derided cultural elite and an odd juxtaposition of foreign multinationals and organised labour movements.

The big winners were the English towns and countryside, small and medium sized domestically-focused companies, entrepreneurs and wealthy business owners and investors. 

This new winning coalition represents a radical break from the New Labour/New Tory era, but one that’s not afraid to borrow from Blair’s centralising, data-first, technocratic toolkit. Some issues will be less important than before, others will rise up the agenda. Freedom of speech may trump concerns over giving offence, jobs in towns may trump high-tech investment in London, devolution may give way to centralisation, competition to state aid. Time will tell the specifics, but going back to normal is out of the question.

For business, we could expect Britain to embrace larger trends that are seen elsewhere in the world. Chinese state backing of companies and non-participation in IP and open market access rules has changed the game, and Donald Trump has upped the stakes. Even the EU is responding with sectoral champions, key supply chains to directly compete with American and Chinese giants. At the same time people’s level of trust in business and other traditional sources of authority is dropping around the world. So firms could expect more barriers, not fewer, and a greater favouring of local companies or at least those companies that put local voter interests first. 

This will play out in interesting ways inside a geographically divided Britain - don’t expect any fanfare if you open a new facility of Shoreditch or Oxford, but there could be rapturous applause in Runcorn or Mansfield.

With governments more willing to back companies that enjoy voter support, the general public will necessarily become a more important stakeholder for businesses, alongside shareholders, employees and customers. There could well be greater efforts to dig deeper local roots and show that an employer is here to stay in a community. In a sense, businesses will need to act more politically - like government does - as the general public will increasingly treat them just as harshly. Doing so without taking sides will be no easy matter.

It remains to be seen how permanent or significant this realignment of British politics and its relationship with the world is, but I doubt we are anywhere near the end and British businesses will need to build flexibility into their plans to move between opposing camps as this plays out.

Image credit: Jack Hill - WPA Pool/Getty Images

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