Over recent weeks I have been updating this Q&A on what happens next after the UK election and what this may mean for Brexit:
What’s the process for forming a new government?
The Conservative party has now reached an agreement with the Democratic Unionist Party (the DUP); the support of the DUP’s 10 MPs gives the Conservatives a parliamentary majority. This is on a ‘confidence and supply’ basis. This is not a formal coalition but rather an agreement to support the government on crucial parliamentary votes, specifically the Queen Speech, Budget, Brexit legislation and any security legislation. DUP support is in exchange for a £1 billion additional funding for Northern Ireland over the next 2 years (particularly for infrastructure, health and education) and policy concessions (including a commitment not to implement Conservative manifesto proposals to change the pensions 'triple lock' and winter fuel payments).
What does Theresa May's cabinet reshuffle tell us?
In the main this has been a continuity cabinet, with seventeen out of twenty one Secretaries of State keeping their previous roles. Before the election there was gossip that a number of high profile ministers would be moved and that some government departments would be reorganised. This shows that whereas 10 Downing Street was the hub of power before the election, that power is now more dispersed and dependent upon cabinet support.
The balance of the new Cabinet in terms of approach to Brexit is much the same as before the election. Michael Gove comes in as one of the leading "leave" campaigners whilst Damian Green, strongly pro-European, becomes "First Secretary of State" (in effect, Deputy Prime Minister).
How does the election result affect government business in Parliament?
Without a government majority, Parliament becomes more important and more powerful. Minsters have to devote more time to parliamentary business, to ensure votes are carried; compromises on legislation are more likely as the opposition and backbenchers have more success in agreeing amendments; and more controversial legislation stands less chance of being agreed. This also affects other government business, as Ministers can get tired by parliamentary pressures and have less time to devote to other matters (eg Brexit negotiations!).
How else could this affect Brexit?
We will have to wait and see. In terms of the government’s backbenchers and Ministers, power seems to be evenly split between those who want to retain more links with Europe and a 'softer Brexit' (eg based on the EEA model) and those who would be happy to leave the EU without agreeing a deal and would prefer a short, sharp exit (see our guide to hard and soft Brexit and also our guide to different models of trading relationships with the EU).
There is a view that a deal with the DUP may bring with it some agreements that provide for a ‘softer Brexit’. Whilst the DUP were the only party in Northern Ireland to campaign for Brexit, they have advocated a “positive relationship” with the EU and it is worth bearing in mind that many of their core supporters are small business owners. The DUP manifesto identified Brexit priorities as including some element of free movement of people and an open land border with the republic of Ireland. The pro-devolution approach of the DUP and their involvement in Brexit negotiations may also force the government to work more closely with other devolved administrations in Scotland and Wales on Brexit preparations. Furthermore, the government will be mindful that to ensure they can definitely get the final Brexit deal approved by Parliament in 2 years’ time they may want a deal that a wider group of MPs can support.
How has the EU reacted?
The other impact on Brexit is that the EU heads of state and negotiators will see the UK in a weaker negotiating position. The Government will not have a strong electoral mandate to bring to the negotiating table, unless it seeks to a more collaborative relationship with the Labour party and other major UK political parties on Brexit negotiations.
Meanwhile, some of those on the other side of the table have strengthened their own power. The new French President, Emmanuel Macron, has just received a further boost to his pro-EU and pro labour market reform agenda, winning strong majority for his new En Marche centrist political party. Angela Merkel faces an election in Germany on 24 September; her CDU party currently has a good lead over their rivals the SPD (but we have seen that poll leads can collapse!).
How should I plan for Brexit?
For these reasons, we recommend that any organisation should continue to plan for a number of possible Brexit scenarios. Whilst a "softer" negotiated Brexit may be a stronger possibility than it was before there is now also an increased possibility of "chaotic Brexit" with the negotiations running out of time and Parliament and government unable to agree on a common approach. Under this scenario we would leave the EU at the end of March 2019 with no deal in place - not so much as a deliberate decision and more as a result of inability to negotiate. Further Grant Thornton insights on Brexit can be found here .
Will the Conservatives implement their manifesto now?
The political and legislative agenda set out in the Queens Speech was a stripped back affair, dropping much of the Conservative party election manifesto and the strategic ‘giant challenges’ this identified. It set an agenda with two objectives; deliver Brexit and ensure the government stays in power for the duration of the Brexit negotiations. You can read more on this in my blog on the Queen's Speech