Geo-political uncertainty and volatility is the new norm. Politics, and its inter relationship with economics and market behaviours, is creating a rapidly changing business environment, in turn accelerated by demographics and technology.

In the UK, the newly agreed Brexit ‘flextension’ will accentuate this and in turn shape the business environment. 

So, what might we see during the ‘flextension’ period and beyond?

European elections...

The UK will be holding European Parliament elections on 23 May (unless the withdrawal agreement (phase one) can be ratified before then). This provides new and insurgent political parties with an opportunity to win seats, gain valuable air time and shift debate on key policy issues.

Brexit has eroded what little trust there was in the main political parties - providing fertile ground for others.

It will be interesting to see what parties such as UKIP, Nigel Farage’s Brexit Party and the new centre party Change UK (set up by the independent group of MPs - TIG) put in their manifestos and how they perform.

In Europe, these elections are expected to see an increase in extremist MPs – from fringe parties. Responding to this will become a bigger challenge for the new leaders of the EU (a new President of the EU Council and a new president of the European Commission taking over from Donald Tusk and Jean-Claude Juncker later this year).

A new Conservative party leader...

Theresa May promised her party that she would step down once phase one of Brexit was complete – though her departure as PM may come before then. The current jostling and speeches from Cabinet ministers and high-profile backbenchers suggest they think a leadership change is coming sooner rather than later.

In the event May does vacate 10 Downing street the Conservative party will undertake a leadership contest, to identify a new leader and the next UK Prime Minister.

While we don’t know who will stand and make it through the early voting rounds, the rules of the system combined with the preferences of the Conservative Party membership mean we are likely to see the election of a leader with very different policies to those of recent years.

A general election in the UK...

Given the deadlock in Westminster and increasing inability of the government to command a majority we may see an early general election.

This will be the hardest to predict in decades.

Following the European elections and depending on the state of play regarding Brexit, a wide variety of outcomes are possible: including a hard right, hard left and a centrist government (either with a majority or forming a minority government) or perhaps even another coalition.

Another referendum...

Another way for Parliamentarians to break the current Brexit deadlock would be to throw the question back to the people.

The question on the ballot paper is likely to be remain (via revocation) Vs any deal agreed between the UK and EU which has parliamentary support.

Although MPs are wary of being seen to “ask until they get the decision they want” it does have a few things going for it:

  • It is not an election – sounds obvious but many MPs will not want to fight a general election now. Those in marginal seats and the TIGs among others.
  • It provides clarity on the biggest subject – a referendum is a single-issue vote, a general election is not. As described above there is no guarantee of a majority for either main party and we do not know what their manifestos would say on the subject.
  • Labour membership is supportive – this means there is scope for Labour whipping behind it, giving around 240 votes as a starting point – meaning less than a 100 need to be found.

While perhaps not probably it is possible. 

Regardless of the outcome of any referendum, the volatility highlighted elsewhere would remain – this is bigger than Brexit.

What does this mean for business?

These changes over the coming months will shape how Brexit develops and, in the UK, the direction of policy and priorities for international trade and relations, tax, regulation and public spending.

Given the volatility, these could vary wildly depending on the outcome. We may well see the end of the established centre-right/centre-left consensus on social and economic policies of the last twenty-five years - at least in the short term.

More than ever before business needs to understand politics and be prepared for political outcomes and policies that may have been previously unimaginable - we can help