This week will see a major political battle in the United Kingdom’s civil war over what happens in 59 days’ time (Brexit day, 31 October). It will also see lines drawn up for an impending electoral battle. As with any war, there will be plenty of smoke, heat, noise and propaganda on all sides. So, what should businesses and other organisations make of all this?
The week ahead
MPs return from holiday tomorrow (Tuesday 3 September). The Government has already announced that it will send MPs away again sometime next week, for a 5-week break (‘prorogation’ of Parliament) until 14 October.
MPs of all parties opposed to a 'no-deal’ Brexit will immediately try to legislate this week to prevent a no-deal Brexit, by passing a law that requires the government to ask the EU for a delay (‘extension of article 50’) if no deal is agreed by 31 October.
On Wednesday the Chancellor of the Exchequer, Sajid Javid announces a mini spending review, setting out government spending plans for one year (2020-2021). This will focus on ending some austerity restrictions with spending increases for education, health and policing. Unlike a Budget it will not include an updated economic forecast from the government’s budgetary watchdog the Office for Budgetary Responsibility; nor will it include any tax changes. These will await a full-blown Budget later in the year (probably after 31 October).
After that, anything could happen!
There is speculation that if MPs succeed in passing legislation to try to stop no-deal, Boris Johnson could try to call an election as early as this week (NB but this requires MPs to agree). Ministers have also indicated government could ignore any legislation passed by rebel MPs this week. After last week’s surprise announcement of prorogation of parliament, the Government may have further surprise tactics up its sleeve.
What does all this mean for business?
This political turmoil and machinations have three main consequences for businesses, employers and organisations in the UK:-
1. Prepare for no-deal Brexit on 31 October
The Government’s prorogation of parliament for 5 weeks is designed to prevent MPs preventing no-deal on 31 October. If MPs do pass legislation against no-deal this week, this can not guarantee to stop no-deal: ministers have indicated they could ignore it and this would be easier to do if an election was called; any request to delay Brexit requires the unanimous agreement of EU leaders and the UK Government could encourage one of them to refuse or create incentives for EU leaders to turn own the request.
A revised deal is still possible but signs from EU-UK talks are not encouraging, with no new proposals on the table; some ‘window dressing’ changes may be agreed at the crunch EU summit on 17 October, but this will still need approval by MPs. By 17 October Boris Johnson will face opposition from hard-line Brexit MPs in his own party who will have no-deal in sight, and he may struggle to secure the support he needs from some Labour MPs at a time of increased hostility between the parties. No-deal Brexit remains the most likely outcome.
Every organisation needs to take its battle station for no-deal. This week Government launched its ‘Get Ready’ campaign. The government website provides comprehensive information on the UK and EU legal changes that business should plan for: Get Ready for Brexit
Organisations also need to think about the wider economic and social impact no-deal will have on their business environment (including consumer confidence and economic downturn and impact on customers), the knock-on effects (including supply chain disruption, foreign exchange rates, cash flow and cumulative costs) and opportunities (some lower UK tariffs for third country imports, competitive advantages in your business model, undervalued assets for acquisitions).
As always, here are our tips on prioritising this: Brexit essentials guide
2. Be ready for an election
The Government currently has a majority of one and may well lose this in the coming days. Boris Johnson’s government has been in election campaign mode through the summer and this will intensify. Wednesday’s spending review will emphasise his election messages beyond Brexit: health, education and policing. An election in the next six months is a dead cert; it could be as early as mid-October.
Whilst the Conservatives lead opinion polls, current volatility means anything could happen, including a Conservative-Brexit party coalition, a Labour-SNP coalition or even ‘no overall control’. This will shape the future tax, spending and regulatory environment: which is why I am working with businesses to help them with election scenario planning to assess the possible implications.
3. Be prepared for heightened social disorder
Any election is likely to be very divisive. We are seeing senior politicians on all sides using language like ‘attack on democracy’, ‘traitors’, ‘dictatorship’, ‘frustrating the will of the people’ and ‘coup’. Last week we saw clashes on the streets between anti-prorogation and pro-Brexit demonstrators. I have never seen such intense, polarised political opinion in the UK (even in the 70s and 80s). Without scaremongering or over-reacting, organisations should just make sure their civil emergency plans are up to date and well-practised, routinely remind people of their emergency procedures, and be prepared for demonstrations and disorder this autumn that could disrupt normal business.
The political battles this week are part of a wider Brexit ‘civil war’, exacerbating and feeding on a deeper crisis in established political parties and institutions (discussion of the economic, technological and demographic causes of this are for another time…). This means that all organisations in the UK need to plan for political and social volatility: like Government you need to be on a war-footing ready no-deal Brexit on 31 October and you should assess the impact of wider political and social volatility.
As politicians take to their battle stations for the Brexit civil war this week, businesses need to get ready for a no-deal Brexit, an election and the possibility of social disorder.