"Should the United Kingdom remain a member of the European Union or leave the European Union?"
Background
The UK's EU referendum will take place on Thursday 23rd June.
Over the last 40 years UK voters have, on average, been in favour of EU membership, albeit by a fairly narrow margin and with wide fluctuations. Over the last year the opinion polls show a marked narrowing of the pro-EU lead, partly in response to the migration crisis. Across four polls carried out over January and the first week of February, the stay vote averaged 44% and the leave 40%, with 16% undecided.
What is clear is that Brexit is a high-impact event with a non-trivial probability of materialising. The issues involved, particularly post-Brexit legal, regulatory and trading arrangements, are complex and uncertain. Inevitably given the historic importance of the issues, much of the debate around Brexit is partisan and/or speculative.
This paper is designed to help you in planning and preparing for such uncertainties.
Phases
There are likely to be three distinct phases of this process:
- The referendum campaign up to the vote on 23rd June
- If the vote were to be to leave the EU, the period, formally set at two years, during which the UK would negotiate with the EU and the rest of the world. During this phase existing EU arrangements would continue to operate
- The new, post-EU business framework that would emerge, possibly piecemeal, over a number of years
Considerations
Given the uncertainties about the outcome of the referendum and the post-EU environment, there is a premium on measures which are proportionate, low cost and put organisations in the best position to manage the uncertainties and maximise opportunities.
The key considerations now are:
- Planning: conduct an impact assessment and identify which issues or opportunities need addressing now and which can wait
- Reporting: ensure that, where material risks are identified, they are addressed in financial reporting
- Positioning: decide whether to take a public 'campaigning position', and if so what lines should be taken.
A structured approach
Our framework is based on previous experience of helping clients prepare for headline challenges such as the Eurozone crisis and Scottish Independence. It provides a structured approach to considering the impacts on business investments and operations and make appropriate plans if the UK were to have looser ties with the EU.
Impact analysis: Assess exposure to EU and potential impact of Brexit
Key themes | Key questions to consider |
Britain's influence |
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Economics |
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Strategy & Operations |
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Tax & Legal |
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Regulation |
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Talent |
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Communications |
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One of the key considerations will be which issues to focus time and effort on now, ahead of the referendum. Organisations may wish to identify activities or investments (current and future) which could be affected by market volatility, scarcity or demand or supply-side changes in the lead-up to or immediately following the referendum.
How we can help
Deloitte can help you understand and prepare for the uncertainty in light of the referendum. We bring deep experience in contingency planning for uncertain events and specifically in supporting clients through planning and preparations for Grexit and Scottish Independence, as well as specialist subject matter and industry sector expertise.
Our approach is designed to help you achieve the right balance between what you should do now and waiting until there is more clarity on the eventual outcome. It will also provide the analysis necessary to take a public stance if desired, support external reporting of potential risks and in preparation for analyst briefings.
Doing nothing may leave you vulnerable if your stakeholders ask questions or your activities are sensitive to changes in market rates, demand or supply changes in the lead up to or immediate aftermath of the referendum.
Structured Approach |
We can work with you to
conduct a broad impact analysis against one or more defined
scenarios:
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Specialist Expertise |
Deloitte has a wealth of
subject matter experts who are able to provide advice or input on
specific issues as part of your overall programme or task-force.
These include:
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Information Briefings |
Sign-up to receive Ian
Stewart's Monday Morning Briefing, at
www.deloitte.co.uk/mondaybriefing, which includes a dedicated
Brexit news section and information on the latest polling
data. On request we can provide specific or regular information briefings covering the facts, economics and sentiment (pre and post referendum), summarising key information from:
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APPENDIX 1: EXIT SCENARIOS
UK's range of options inside and outside the European Union
There is no template for Brexit. The scenarios following a vote to leave the EU would be decided during a two-year Negotiation Phase, with many uncertainties as to how this phase would progress. The outcomes below are an illustrative guide to the most talked about alternatives to EU membership. Working through potential outcomes will support contingency planning and prepare management for effective response.
APPENDIX 2: KEY READING
These are some of the sources that we have consulted while researching this topic. We have found them useful in illuminating some of the key issues in the debate. The range of views held by the authors also serves to illustrate the uncertainties that surround many of these key issues.
Bibliography
This House of Common's Library briefing provides an
objective – and relatively concise – discussion of the
main legal aspects of withdrawal and the possible alternatives to
EU membership (138 pages).
Exiting the EU: UK reform proposals, legal impact and
alternatives to membership, House of Commons Library
http://researchbriefings.files.parliament.uk/documents/CBP-7213/CBP-7213.pdf
Also from the House of Common's Library, this briefing
provides a more detailed assessment of the withdrawal process, as
well as a very useful outline of the potential impact of an EU-exit
in different policy areas (137 pages).
Leaving the EU, House of Commons Library
http://researchbriefings.files.parliament.uk/documents/RP13-42/RP13-42.pdf
This study by Dr Rebecca Driver examines the economic benefits
that accrue from the UK's membership of the EU, and argues that
membership is essential for the UK's economic success (98
pages).
Analysing the Case for EU Membership: How Does the Economic
Evidence Stack Up?, TheCityUK
https://www.thecityuk.com/research/analysing-the-case-for-eu-membership-does-the-economic-evidence-stack-up/
This Confederation of British Industry (CBI) analysis take a
look at the most discussed alternatives to UK EU membership, before
concluding that no credible alternatives currently exist and that
"half-way house models such as Norway and Switzerland are not
the answer." (15 pages)
Doing things by halves? Alternatives to UK EU membership:
Lessons from Switzerland and Norway, CBI
http://www.cbi.org.uk/media/2133649/doing_things_by_halves_-_lessons_from_switzerland_and_norway_cbi_report_july_2013.pdf
The CSFI survey, published in April 2015, gives an indication of
the City's position on Europe and where their main concerns lie
(29 pages).
The City and Brexit: A CSFI survey of the financial
services sector's views on Britain and the EU
http://static1.squarespace.com/static/54d620fce4b049bf4cd5be9b/t/5536a1e8e4b0eb6a74abaf16/
1429643752526/CSFI+The+City+and+Brexit.pdf
In this comprehensive analysis, the authors identify six stages
of "staged separation and recovery" following a vote to
leave the EU, and then present a vision for the UK's long-term
development outside Europe (420 pages).
Flexcit: The Market Solution to Leaving the EU, Dr Richard
A E North and Robert Oulds
http://www.eureferendum.com/documents/flexcit.pdf
Iain Mansfield's paper won the Institute of Economic
Affair's (IEA) 2014 'Brexit Prize' and provides a
vision for how the UK may be able to prosper outside the EU (67
pages).
A Blueprint for Britain: Openness not Isolation, Iain
Mansfield
http://www.iea.org.uk/sites/default/files/publications/files/Brexit%20Entry%20170_final_bio_web.pdf
A finalist for the IEA's 2014 Brexit Prize, Daniel Pycock presents a detailed analysis of how an EU-exit could work practically, and why he thinks such a process could work in the UK's favour (58 pages). The plan to leave the European Union by 2020, Daniel C. Pycock http://www.iea.org.uk/sites/default/files/publications/files/Pycock%20BREXIT%20entry_web_0.pdf
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.