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The UK in 2020: Beyond Elections and Brexit

02 January 2020

The key points for business from the new UK Government

The United Kingdom has appeared to be somewhat dis-united since the momentous vote to leave the European Union in the summer of 2016. But December’s General Election has settled the question of when and how the UK will leave the European Union, while for some seeming to raise questions over the future of the Union of the four nations of England, Scotland, Wales and Northern Ireland.

Following the result of the election, we have taken a look at what a Conservative majority will mean for corporates here in the UK and around the world.

The end of one union – Brexit and beyond

The Conservative party’s campaign took its cues from the successful Leave campaign (‘take back control’) and indeed from President Trump (‘make America great again’), and hammered home one clear message throughout their campaign: get Brexit done.

It was a simple message and one that resonated clearly with voters, alongside another well-repeated plea to ‘end the dither and delay’, Prime Minister Johnson has wasted little time in carving a clear path towards Brexit.

The UK will now leave the European Union on 31 January – at which point a transition period will begin. This transition will mean no significant changes for businesses – trade and tariffs will continue as before, but negotiations with the EU and with other trading partners will move into formal proceedings.

Read more about the ongoing Brexit negotiations on our dedicated page.

The big question: will the UK lean towards the US or the EU in terms of future regulatory alignment?

One thing we do think is that the negotiations with the EU will get very noisy, and that there will be a series of peaks and troughs. Our Head of Government relations, Peter Gordon, explains that a deal can be done:

“Despite what you might read about the difficulty of, for example, the EU-Canada Free Trade Agreement, and the seven years it took to negotiate, a trade deal can be done. You can put in place essentially a very basic FTA (Free Trade Agreement), or what’s been termed a ‘skinny FTA’.

“In other words, a very basic agreement between the UK and the EU that would only need to be agreed between the European Commission, the European Council [made up of EU nation’s leaders], and the UK. It’s only the more complex and comprehensive deals that need to involve other member states’ ratification.

“What Prime Minister Johnson could do is agree that very basic deal at the end of 2020 and then use the remaining time between then and the next election to really build upon that. And so thus come the next election, you do have that comprehensive deal in place.”

The necessity for such a basic deal now has added imperative, as the legislation that enacts the Withdrawal Agreement – the document that takes the UK out of the EU – into UK law includes a guarantee that the transition period of leaving cannot be extended beyond the end of 2020. During this transition period there are no material changes to the UK’s relationship with the EU in terms of trade, and freedom of movement of people, goods, capital and services. So the end of 2020 now becomes the date for businesses to watch.

The end of another union? Scottish independence

While the Conservatives achieved a majority in the House of Commons, the SNP (Scottish National Party) won 48 of the 59 seats from Scotland, prompting SNP leader, Nicola Sturgeon, to vocally call for a second independence referendum.

The Conservative Government have consistently rebuffed calls for a referendum, and indeed the number of seats the party won was not even a record – that was set in the 2015 General Election where the SNP rode a wave of nationalistic sentiment following their last referendum on independance. That time around they returned all but three of the nation’s MPs as SNP.

Gordon says that although this election is “a great result for the SNP,” he also points out that, “overall, the voters that voted for anti-independence parties did outnumber the voters that voted for SNP. We've got elections to the devolved Scottish Government in Holyrood in spring 2021. 

“And to me, that feels like a much more natural point of focus whereby if the SNP go in to that spring 2021 election on a clear cut mandate that a vote for the SNP is a vote for a second Scottish referendum, and they dominate that election. Well, then I think it becomes a real issue.”

There has also been some talk of whether some of the seat changes in Northern Ireland – alongside concern that there could be a customs separation of the nation from the rest of the United Kingdom after Brexit – could lead to Irish unification. 

Two seats in Belfast switched from the unionist DUP to nationalist parties, but both of these seats have previously changed hands between nationalists and unionists.

Gordon explains: “This was a relatively small swing in both seats and I don't necessarily think it means that Irish invocation is happening next year, but obviously it is a topic and I think the most important thing in regards to that will be the outcome of Brexit and what it means for Northern Ireland.”

The Queen’s speech

Unusually for December, the Queen has delivered her speech to herald the opening of a parliamentary session just days before her traditional Christmas message.

Alongside six pieces of legislation related to Brexit, there were a total of 30 proposed bills covering the UK’s health service, fire safety, terrorism and sentencing, and the environment.

The big areas of interest for businesses will be those Brexit bills – covering trade, financial services, agriculture, fisheries and immigration. Businesses will be most interested in what the proposed points-based immigration system looks like. The system is expected to be similar to the Australian immigration system, with points allocated within three categories, focused on skills rather than nationality:

  • Skilled workers who meet the points criteria and have a job-offer
  • Migrants who have received ‘world-leading awards’, or entrepreneurs setting up new businesses
  • Low-skilled workers, and young people travelling – this does not confer permanent settled status but will enable businesses to sponsor workers entering the country.

There will also be an increased quota for seasonal agricultural workers.

The Trade Bill will help to ensure continuity for businesses by transitioning trade agreements that the UK currently has through its membership of the EU. By the time this legislation has been enacted, it’s likely that businesses will know more about the UK Government’s aspirations for global trade. Talks are already ongoing, and we saw this during the election campaign, with the Labour party revealing redacted transcripts of conversations between the US and UK about trade.

Peter Gordon explains that, “one of the things that took a lot of people by surprise when Jeremy Corbyn produced leaked documents of UK-US trade talks was just the depth of conversations that have been ongoing. The Department for International Trade has been working quite heavily to tee up the issues around that.  

“And in the same way it's talking to South Korea, Japan, Singapore, and Australia, all these efforts are underway and obviously, just after the EU, the US is really the golden trade deal that the UK will be trying to get.”

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