We are coming to the end of this year’s General Election and the finishing post is in sight. Although the Conservatives have a consistent lead in the opinion polls, this doesn’t mean that the race is over. We all know the challenges of opinion polls and with our first winter election in nearly a century, there are plenty of variables. The important thing is for all social enterprises to treat this election with an open mind and prepare for a range of eventualities.
With that in mind, this is the third in a series of blog posts on the election and what it might mean for social enterprises. Last time, we covered key policy battlegrounds which may impact on social enterprises. Now we are looking at Brexit. What are the parties saying, what might it mean for social enterprises?
To referendum or not referendum, that is the question…
At the heart of the debate during this election has been whether there should be another referendum on leaving the EU or not. If the Conservatives win a majority of any kind, then it seems unlikely that there would be a referendum. Boris Johnson has claimed that all his candidates are signed up to his Brexit deal and if that is true, then he should have the numbers to do so. That being said, there are reports that there are around 15-20 Conservatives who are still thought to be possible of a “wobble” on the deal, so any majority in the 10-20 seat margin could still throw a spanner in the works.
Labour is promising to renegotiate a new Brexit deal within 3 months and then have a referendum on that deal within six months. This would mean another June EU referendum (roughly four years after the first one). Labour would get support from the SNP, Plaid Cyrmu and Lib Dems on a second referendum so if Labour is the largest party, close to a majority or with a majority, the numbers appear to be there. Interestingly, the DUP now looks to be considering a second referendum as well – so it looks like all the main parties in Parliament could be in favour of a referendum bar the Conservatives (and the Brexit Party, should they win any seats).
The Liberal Democrats are still pushing revoking Article 50, but have said that they will support a second referendum should there be the numbers in Parliament.
What’s the big deal?
In both likely scenarios (Con majority or Lab majority/minority government) there is going to be a deal on the table.
The Conservatives are pushing their withdrawal agreement, which pretty much keeps the status quo until the end of 2020 and then using the space to agree a “comprehensive” free trade agreement with the EU. Sounds simple on paper, but in practice most commentators in this space do not think that it will be possible to strike a comprehensive free trade agreement in that time. Although it has to be said that the EU has said it is “possible” to reach some kind of agreement by the end of 2020, although perhaps not a comprehensive one.
The Conservative’s trade agreement would be on the basis of “zero tariffs, zero quotas” and agreement that both side will recognise their regulations as equivalent on services. In theory this could be possible, but the chances of the EU agreeing to this without some legal guarantee that the UK will not diverge substantially from EU standards in the future seems pretty slim.
The Labour Party is offering a customs union with the EU which would basically preserve the status quo on trade. Arguably, this would prevent further trade agreements with other countries, but advocates would say that as the EU is our main trading partner and this is more important than potential agreements with other parts of the world. A customs union has been sort-of offered by the EU before, so it is possible although most experts think that three months is incredibly ambitious to agree this – particularly given that some of this will be taking place over Christmas and New Year. For business, a customs union would pretty much lock in what we currently enjoy in terms of EU trade.
Deal or no deal?
The Labour Party has repeatedly said that it will not support No Deal. The Conservatives have said that they will not extend the transition past the end of December 2020. So, we could be back facing the cliff-edge of no deal in December 2020 should the Conservatives get a majority and are not able to get their trade agreement through in time.
A big factor here will be whether Conservative MPs who have signed up to Boris’ deal will agree with No Deal should there be no agreement with the EU. Just because a MP says they will back Boris’ deal doesn’t mean that they are backing No Deal – although they will come under huge pressure to do so given the Conservatives campaign to “Get Brexit Done”. Also, there is the House of Lords which will feel empowered in the event of a No Deal to do what it can to extend the process and that could create space for those concerned about No Deal to act.
The Liberal Democrats, SNP and Plaid Cymru are also all anti-no deal, so unless the Conservatives get a big majority, we could be in a situation where we have the Withdrawal Agreement done, but no future arrangement with the EU. This would mean trading on WTO rules after December 2020 which most economic commentators believe would be a big shock to the UK economy.
What does this mean for social enterprises?
Social enterprises need to prepare for two scenarios. One is a scenario in which the Conservatives win, there is a quick passage of the Withdrawal Agreement and we move onto trade talks with a risk of no deal by 2020. This is pretty much the same scenario as social enterprises were preparing for in March and October 2019, with the added emphasis that in the event of a Conservative victory, Johnson will have the numbers in Parliament to back it up. A No Deal Brexit is firmly on the table and could cause economic turbulence in 2020.
The other scenario is that Labour is in government and we have a second referendum in June 2020. Assuming that there will need to be some preparation time for Brexit should the referendum again say that we should leave the EU, you would assume that we are looking at December 2020 or perhaps spring 2021 before we formally leave the EU under Labour’s plans.
The big risk here is that the electoral coalition that brought the second referendum together could struggle to implement the result, unless the result is Remain. Is it realistic that Labour, Lib Dems, SNP and Plaid MPs that just voted through a Brexit referendum (and campaigning for remain) would then vote through an agreement that took the UK out of the EU? Or would it fracture and lead to another election?
In both scenarios, it is prudent for social enterprises to keep preparing for Brexit – focusing on their own financial, trade and staffing risks. There is no indication, yet, that Brexit is anywhere near off the table and until the situation clarifies, social enterprises must proceed with the risks of Brexit very much at the top of their minds.