Seeking reassurance: What can business take from the Prime Minister’s speech on Brexit?

Jamie in our Public Affairs team

“A confident, global trading nation that seizes the opportunities before it.”

This was the grand vision that the Prime Minister, Theresa May, yesterday set out for Britain outside the EU. Her set piece speech, trailed for days, was designed to provide some level of reassurance. The Prime Minister has been accused of losing grip on Britain’s path to Brexit, of not having a plan or vision for the months and years ahead. So this was her opportunity to wash these accusations away, and regain the political initiative.

Politics aside, businesses and employers craved just one thing – some certainty. And that was what yesterday’s speech was intended to produce.

The Prime Minister framed her announcements around twelve objectives for the negotiation ahead. Objective number one on the list could not have provided a clearer sense of intent … “Certainty and Clarity”.

The Prime Minister confirmed that the body of existing EU law would be converted into British law as Brexit takes place. This will at least provide some continuity as the government sifts through the EU regulations, rules and standards that have become so entwined within British legislation. In her own words, “The same rules and laws will apply on the day after Brexit as they did before.” And, Mrs May announced, any deal with the EU will be put to a Parliamentary vote.

For companies worrying about the future of intellectual property law, rules around the transfer of data across the continent or a myriad of other regulatory issues, this should supply some comfort. These existing laws will, of course, be subject to parliamentary scrutiny and may change in the future. But at least a process is now in place and some short term stability more likely.

The same is true for companies who rely on European workers. Although unable to supply a definitive answer in her speech, May did highlight a desire to “guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals in other member states…” The Prime Minister even hinted that such a deal would have been agreed already were it not for the resistance of one or two other countries. But even without a definitive statement, sectors reliant on European labour, such as construction or agriculture, can rest a little more easily.

And then Theresa May made the announcement that will have the longest term implications for the British economy: the UK will be leaving the Single Market and customs union.

She was unequivocal: Remaining in the Single Market “would to all intents and purposes mean not leaving the EU at all.”  Instead the UK will “seek the greatest possible access to it through a new, comprehensive, bold, and ambitious Free Trade Agreement.”

Later in the day, in a statement to Parliament, the Brexit Secretary, David Davis, clarified this point. “We will seek a customs agreement with the European Union, with the aim of ensuring that cross-border trade remains as barrier-free as possible.”

The markets’ response was mixed. While the FTSE fell, the pound, helped by rising inflation, gained against various major currencies – its best day since 1998 according to Thomson Reuters. It would appear that very few traders were surprised by the Prime Minister’s announcement – not least after the weekend pre-briefing suggesting the Government expected the markets to react badly to the speech – which removed the worst of the sting.

The problem for the Government is that this new, bold, ambitious agreement is unprecedented. For months commentators have debated the merits of different models of cooperation and engagement. But now, following the unequivocal statement that we will be leaving the Single Market, we will instead need to create a completely new set of arrangements, from scratch. While this may build upon certain aspects of existing cooperation within industries like financial services or the automotive sector, it will ultimately be a new trading environment. And there will be uncertainty for business while the myriad details are worked out.

We know now that Brexit really will mean Brexit. Finding out exactly that means for individual businesses and sectors may take a little more time.