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The BREXIT Bulletin: Will upcoming Elections derail Brexit?

28th April 2017


Elections will be a feature of the first six months of the Brexit negotiations - and not just any elections, but those that will determine the French President, the French legislative elections, elections for the next German Chancellor in September, and - lest we forget - the UK General Election in June.

The EU's main power-brokers could be very different once November comes around. A President Macron, a Chancellor Schulz, and - probably still - Prime Minister May will all be in a position to dictate how Brexit pans out for both the UK and the EU.

The question is - to what extent will Brexit differ, depending on the results of the EU elections?

Instinct says that Downing Street should fear Emmanuel Macron and Martin Schulz, but there's actually not much evidence to suggest that either would strongly deviate from their country's line at the current time.

A President Le Pen may be more inclined to make Brexit look attractive and pledge support, but is this support what the UK really wants as it seeks a "deep and special" relationship with the EU? 

Macron may be pro-EU, but he's also a centrist and a former banker. The UK may feel it has a lot in common with someone like that.

Finally, how likely is it for Martin Schulz to be any less tough than Angela Merkel on the EU's four freedoms? It's not in his interest either that the UK-German economic relationship deteriorates, but neither does this former President of the European Parliament want the EU to be an obvious loser from the deal.

Elections can be historic occasions, but if the political centre ground remains in power, and the political fringes remain...well...on the fringes, there is no real reason why Brexit should be significantly impacted in anyone's favour. The political course is likely to remain constant and largely unchanging.
 

Sectoral Insight
Contributed by Nick Crosby, Senior Director Grayling PA

Brexit is a predator in the EU health ecosystem
The impact of Brexit on Europe’s healthcare system will be profound- if more subtle, long term and slow in manifesting itself than in, say, financial services. Brits make a major contribution not only to policy on health and innovation- but to the wider ‘health ecosystem’ that sustains it- patient groups, regulatory agencies, medical societies, research networks etc. This ecosystem doesn’t ‘just happen’. Nor is it ‘free.’  It has been built up by decades of patient work and collaboration between many different bodies and groups, often in novel combinations- for example European Reference Networks, HTA processes and public-private research programmes. The system has evolved new and important institutions, such as the European Medicines Agency (EMA), which will be leaving London. The decision criteria will be announced this weekend by the European Commission.
 
The UK outside the EU risks creating uncertainty and divergence within the system. It is an open question to what degree the UK will seek to ‘deregulate’ or reduce alleged burdensome EU regulations- perhaps in the clinical trials area? There will also be risks in other areas, in the flow of human talent, R&D programmes, supply chains and investment sites. As a senior pharma contact commented: "We cannot afford to have ‘perishable’ vaccines held up at borders."
 
The Grayling View
The ecosystem has evolved to allow ideas, products and people to move around with ease. It cannot be assumed that once the UK leaves, this delicate system will survive unscathed. For clients, it will mean an increased requirement to ‘fill the gap’ or creatively ‘keep the Brits in’; it will mean arguing towards both the Commission and the UK Government for the maintenance of very close regulatory alignment; and this will mean some form of joint meetings, processes and information sharing. It will be a degree of cooperation much closer than the relationship of the FDA in the US to current EU authorities. The Brexit predator has to be turned into a Brexit protector.

 

The highlights from the UK
Jonathan Curtis – Grayling PA – Head of Public Affairs, Grayling UK

 “The General Election should have little impact on the UK’s Brexit policy, but it highlights the importance of developing relationships with Team May”

 
How the General Election will effect Brexit policy in the UK
UK Prime Minister, Theresa May, caught everyone by surprise by calling a general election for June 8th. She immediately positioned the election as a ‘Brexit election’, calling for an increased parliamentary majority that would enable her to deliver her vision of Brexit.
 
Despite positioning the election as a Brexit election, early indications are that May will not announce any major changes to the Brexit plan she set out in her Lancaster House speech. The election has, however, increased scrutiny of the two major opposition parties’ policies for Brexit.
 
The Labour Party, led by Jeremy Corbyn, is pledging to deliver a Labour Brexit, but the details of what this would involve are scarce. The only clear pledge is that the rights of EU nationals will be protected.
 
The Liberal Democrats, led by Tim Farron, have a clear policy to remain in the EU which they hope to deliver through a second referendum on EU membership. If the 48% of the UK which voted “remain” mimic the behaviour of “yes” voters following the Scottish referendum then, like the SNP, the Liberal Democrats could preside over a shock sweep to power. This possibility is not, however, being seriously countenanced by psephologists or anyone else.
 
The Grayling view 
Theresa May can be confident in her chances of success in this election. The Conservative Party is over 20 points ahead in the polls, and May’s own personal approval ratings are the highest on record. People and organisations should therefore continue to work with May’s Government and prepare for a Brexit in which the UK leaves the single market, ends freedom of movement, and removes itself from the jurisdiction of the European Court of Justice.
 
Sectors that rely on EU migrants to staff their workforce, such as the tourism, hospitality and agriculture sectors, expressed hope that a general election would allow May to ditch the previous Conservative manifesto pledge to cut immigration to the tens of thousands and soften her commitment to end freedom of movement. May has, however, explicitly backed the target since the announcement of the election as well as committing a future Conservative Government to ending freedom of movement. This indicates that May will not use the election as an opportunity to deviate significantly from her previously stated Brexit policy.
 
May’s position within UK politics will also be significantly strengthened. May has already had to row back on a number of domestic policies due to small Conservative rebellions and was worried about passing the 10-15 Brexit related Bills expected on issues such as immigration and transferring EU law into UK law. A larger majority, coupled with new MPs who feel loyalty to the leader who brought them into Parliament, should allow May to follow her domestic Brexit policy agenda with greater vigour.

 
May’s domestic strength will not guarantee her success in Europe, but in the UK being close to May and her advisers is vital.

 

The highlights from Brussels

Key EU decision-makers sojourn in London
Most of the EU’s senior figures and Brexit negotiators have visited London this week at the invitation of the Prime Minister, three days before the EU-27 convene at an Extra-Ordinary European Council Summit to adopt their official position. Antonio Tajani, President of the European Parliament, was the first to be received at Downing Street, to discuss the Parliament’s position outlined in its non-legislative Brexit resolution passed on 5 April. Inviting May to address the Parliament, Tajani repeated the EU’s intention to first consider citizens’ rights and the UK’s outstanding financial obligations, before discussion can begin on the future relationship.
 
Following closely on the heels of Tajani’s vanguard, the European Commission’s President Jean-Claude Juncker, Chief Brexit Negotiator Michel Barnier, and his deputy Sabine Weyand, met with their British equivalents Brexit Secretary David Davis, the top Brexit civil servant Olly Robbins and the Prime Minister. However, surprisingly the dinner was did not see the first publicised face to face meeting between Juncker’s all-powerful Chief of Staff Martin Selmayr and May’s equally omniscient policy guru Nick Timothy.  The conversation over dinner was described as ‘constructive’ and as having touched on issues of global importance other than Brexit. 
 
The Grayling view
Such diplomatic efforts could be seen as a positive sign that the negotiations will be constructive. In many ways these meetings represent the start of the negotiations – laying out the positions, understanding each other’s motivations, assessing whether there is scope for compromise or common ground. Expect more of these meetings – at all levels – in the coming months, and try and schedule meetings and engagement attempts with the key players either just before – in order to influence – or just after, to hear what has been said.
 

European Parliament study on the Consequences of Brexit for public procurement
The European Parliament’s research services released a study for the Committee on the Internal Market and Consumer Protection on the implications of Brexit for public procurement. The study looks at how the public procurement markets will function in both the EU and the UK post-Brexit. It assesses, in comparison with the position under EU membership, the implications of four approaches found in the EU’s relationships with other trading partners - the European Economic Area (EEA) model and the General Procurement Agreement (GPA) model first, and, between these two, what it calls the “EEA-minus” approach and a “GPA-plus” approach.
 
The study also notes the procurement-specific issues that may need to be addressed in any withdrawal agreement (or later transition arrangement). These include:

Treatment of ongoing award procedures;

  • Remedies for violations when proceedings are instituted after Brexit;
  • Retention of records;
  • Treatment of ongoing procurement arrangements in the form of framework agreements, qualification systems and dynamic purchasing systems; and
  • Treatment of contracts concluded before any regime change.

 
The Grayling View
Currently, major public contracts are regulated by four directives in the EU, covering different types of procurement/entities: the Public Contracts Directive, Utilities Directive, Concessions Directive and Defence and Security Directive. These directives prohibit discrimination in awarding covered contracts and require the use of specified transparent award procedures to support this prohibition and promote competition. With regard to international public procurement, the EU is covered by the World Trade Organization’s (WTO) Agreement on Government Procurement (GPA). To further encourage more open and balanced international markets, the EU includes public procurement rules in all its Free Trade agreements.
 
Furthermore, in order to address the reluctance of some non-EU countries to open their public procurement markets to international competition, the EU began exploring a revised proposal for an International Procurement Instrument on 29 January 2016. The International Procurement Instrument confirms the principle of openness of public procurement markets. At the same time, it aims to strengthen the position of the EU when negotiating access for EU businesses to the public procurement markets of non-EU countries and to clarify the legal situation for foreign bidders, goods, and services participating in the EU market. Such ongoing discussions will certainly influence the EU’s position when negotiating public procurement agreements between the EU and the UK.

 

The highlights from EU Member States 

A whole world of opportunities for Catalonia and the Basque Country
The Basque Country and Catalonia, two of the wealthiest and most autonomous Spanish regions have recently entered the Brexit arena. In Catalonia, the regional Government has announced its bid for the coveted European Medicines Agency (EMA), whilst also indicating that it will not compete for financial services firms relocating from London, choosing instead to focus on the tech sector. Catalonia’s investment promotion platform, Catalonia Trade and Investment (ACCIÓ), is currently holding talks with 20 relocation minded firms.

Íñigo Urkullu the President of the Basque Country, has announced the creation of a committee that will examine the challenges and opportunities that Brexit will have for the region. The primary concern of the Basque Government is to secure the rights of the 4,000 or so Basque citizens currently resident in the UK. Trade will also be high on the agenda of the committee as the UK is the Basque Country’s fourth largest trading partner.

The Grayling View
The two Spanish autonomous communities seem to be getting serious about chasing the opportunities Brexit will offer in terms of businesses relocation. As two of the most independent, wealthiest regions in Spain, both regional governments and their respective agencies are investing resources to attract British and international holdings in search of a new home.

Domestically, this could also be seen as a competition with Madrid. The Spanish capital region's government has been attempting to get the European Banking Authority and several financial institutions through its initiative ThinkMadrid, in a typical Spanish regional fight. Overall, what is clear is that Spanish authorities see Brexit as a business opportunity that they do not want to miss. 


Mini-summit ‘emphasises’ European unity after Brexit
On 21 April, Dutch Prime Minister Mark Rutte met with the heads of government from Denmark and Ireland to discuss the consequences of Brexit. According to Ireland’s Prime Minister Enda Kenny, these countries will suffer the most from Brexit. All three have close trade relations with the UK and have often cooperated with the Brits during European negotiations. Whilst highlighting their individual concerns, the three Member States reiterated the unity between the EU-27 and the necessity of the two stage approach favoured by the EU.
 
In parallel, the Dutch House of Representatives supported a motion to reduce the size of the European Parliament after Brexit following the departure of the British delegation's 73 MEPs.
 
The Grayling View
This mini-summit of liberally minded EU economies is a rare glimpse of the patchwork of preferences that have been stitched together to produce the EU’s united front.
 
The Netherlands, Ireland and Denmark’s shared concerns over the future trading relationship could translate into the expedition of the second phase of the negotiations. The Commission has indicated that discussions on the future relationship can only commence once “sufficient progress” has been made on the first ‘divorce’ stage. The Dutch, Irish and Danish may come to disagree with their peers on what this actually entails.
 
Another area of contention may well be the re-allocation of the UK’s 73 seats. The redistribution will further empower large Member States like France and Germany over those like the Netherlands.


Dates for your diary

  • 29 April 2017 - EU Summit
  • 23 April and 7 May 2017 - French Presidential elections
  • 4 May 2017 -  UK Local Elections
  • 8 June 2017 - UK General Election
  • 19 June 2017 - Queen's Speech - Great Repeal Bill + 15 other Brexit Related Bills
  • 11 June - 18 June 2017 - French Legislative Elections
  • 1 July 2017 - Estonian Presidency of the Council
  • 24 September 2017 - German Federal elections
  • End of October 2018 - Negotiations expected to end
  • Autumn 2018 - Spring 2019 - Likely Scottish independence referendum
  • March 2019 - UK expected to leave EU

 

Grayling Brexit Unit
Our Grayling Brexit Unit brings together the very best consultants from across the Grayling network and includes those who have direct experience of working alongside the leading political figures charged with negotiating Brexit in London and Brussels.
The Grayling Brexit Unit is here to support, guide and inform the success of your business and identify how the political dynamics will change as a result of Brexit in both London and Brussels. We are your Brexit experts.
No task is too big, too complex, or too ambitious - please contact Robert Francis Tel +32 2739 47 34  in our Brussels team or Jonathan Curtis in London for more information, and check out our brochure.
 


Grayling Team

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