Recent reports have suggested that, astonishingly, only a minority of big listed companies in the UK have made serious preparations for the possibility that the UK may leave the EU. At the same time, it appears that the PRA has not seen fit to ask the big banks whether they have done contingency planning.
This complacency is dangerous for businesses and their shareholders. With the polls where they are, business should definitely have contingency plans in place. Brexit is no longer a topic to speculate about over a post work drink, it needs active consideration at board level.
Of course a vote to leave would not change the world overnight. No EU citizen working in the City need book the first available flight to Frankfurt. The vote would trigger a process of negotiating the terms of the UK’s future relationship with Europe. This could formally take two years or more. And implementing all the changes would take longer, quite possibly the best part of a decade.
If the UK voted to leave, there would inevitably be short term political and market uncertainty in the UK and the EU. Anyone who has worked at the heart of Whitehall knows how significant the impact could be on jobs, growth and sterling. The private Treasury modelling will doubtless be lurid.
Down the line, there would be longer term consequences for UK based business from changes in many areas. In lots of these, the precise terms that are finally negotiated for the UK’s future status will make an important difference. So contingency planning must look at the possible scenarios in detail. Whether the UK followed the example of Norway, Switzerland or Turkey, or found a new style of relationship, could materially change the way different businesses are affected.
Big questions would arise for companies, beyond the obvious ones about future access to EU and other markets. Will they be ready if necessary to renegotiate licensing arrangements, move their HQs, re-evaluate where they hire their labour force and adhere to diverging technical and regulatory standards?
On top of that, business should understand that the EU itself would not remain static if the UK, Europe’s second largest economy, decided to leave. Having worked at the heart of the Brussels machine, I know just how important the liberalising British influence is.
Without the UK’s voice, the EU’s political and economic culture would shift towards heavier regulation and possibly protectionism. This would still affect the great number UK companies selling goods and services in Europe, where we do almost half our trade. And of course changes in EU rules would make a big difference to the lives of the many British nationals who live in EU countries.
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Understandably there has been less focus so far on the consequences for business of a UK vote to stay in the EU. These will be less dramatic. But we should be considering them just as carefully, because they could open up new opportunities.
If we stay, let’s hope that the UK Government and the Commission would be looking for a positive way forward. Both would have a strong incentive to show that the decision was the right one, and that Britain can play an influential role in a successful, competitive and externally confident EU.
In this case the question for business leaders is this: what are the opportunities and priorities for us if the UK votes to stay in the EU? And what do we want to see on the agenda of the first meeting between Cameron and Juncker after such a result?