In a decision sending shockwaves across world markets, Britain chose to leave the EU in an historic vote with lasting ramifications. As the country absorbs the surprising results, prudent employers would do well to understand what happened, what happens next, and how they can prepare.
Official results were announced Friday morning—it was a close race, but in the end Britain backed Brexit. Despite bad weather and floods leading to travel disruption, voter turnout was high—72.2 per cent of eligible voters cast their ballot in Thursday’s referendum, which amounts to about 33.5 million votes. This fell just short of beating the record for highest voter turnout in a UK-wide election, set at 72.3 per cent in the 1992 general election.
Referendum results paint a picture of a strongly polarised country. The official results are Remain 48 per cent, Leave 52 per cent. Remain areas came in more strongly for Remain than expected, and the same is true for Leave, according to Guardian results.
As expected, Scotland and London voted overwhelmingly for Remain. But outside the capital, every English region had a majority for Leave.
Adding to the uncertainty, on Friday morning David Cameron announced he would resign as Prime Minister by October, stressing that he would do everything he could to ‘steady the ship’ over the next few months but that ‘fresh leadership’ was needed, according to the BBC.
Cameron’s announcement helped momentarily calm turbulent markets and halt a rapidly plunging pound. However, the change in leadership is not a cure-all, and Bank of England (BoE) Governor Mark Carney cautioned that ‘inevitably, there will be a period of uncertainty and adjustment following this result’.
Carney was careful to stress that UK banks are more resilient since the 2008 financial crisis, and that the BoE will implement contingency plans. Carney pledged to make £250 billion available to banks to help steady volatile post-Brexit markets. And for good reason, since the FTSE 100 fell 8 per cent, losing £100 billion in the process, and the pound dipped to a 31-year low, according to Reuters. As banks grapple with chaotic markets and a weak but recovering
pound, uncertainty will be the norm for now.
What Happens Next?
A period of uncertainty is inevitable after such an historic, unprecedented vote, but Britain will not immediately leave the EU. It could take a minimum of two years to negotiate the complex withdrawal process. During that time, Britain will slowly disentangle itself from the EU and renegotiate its economic agreements. Employment law also hangs in the balance, as Britain will now have to decide which EU laws from the last 40+ years to amend or ditch.
Cameron is leaving it to his successor to instigate Article 50 of the Lisbon Treaty, which is the formal mechanism for leaving the EU. But the rules in Article 50 are brief and no country has ever used them before, so the process is not clear at the moment.
How Can I Prepare My Businesses?
Britain has much to figure out in its post-Brexit reality, but will remain an economic powerhouse despite momentary market fluctuation. While Britain recovers and begins to renegotiate its relationship with the EU, understand how Brexit will affect your business and ask yourself the following questions:
- What aspects of EU membership are most important to my business?
- How much of my business comes from the EU?
- How does Brexit affect my supply chain?
- If we lose freedom of movement within the EU, does that hurt my business?
- Does reduced EU regulation help or hurt me?
- Does Brexit open any opportunities for me?
It will be some considerable time before all of the ramifications of the decision made by the British public are understood, with lots of questions still to be answered: who will be negotiating a future for Britain outside of Europe? Will Britain itself stay united, or will Scotland trigger another referendum on membership of the United Kingdom? Some things won't be known for a long time, but as is always the case with flourishing businesses, being able to adapt to a different economic climate - by anticipating differing outcomes - could help you survive and thrive in the long-term.
In the meantime, if you have any concerns about the future of your business, particularly regarding insurance arrangements, then Bollington are on-hand to assist you wherever we can.