Will We Stay Or Will We Go Now? 2 | Will We Stay Or Will We Go Now?

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WILL WE STAY OR WILL WE GO NOW? 2 | WILL WE STAY OR WILL WE GO NOW?

WILL WE STAY OR WILL WE GO NOW? Will the UK leave the EU? Our view is that it is unlikely, albeit not impossible. We caveat this by noting that our job is not to predict, but to prepare our clients for feasible scenarios. But no report on the referendum worth its salt could avoid offering a view, and this is ours.

The fundamentals favour Remain. Polling, for what it is worth, seems better off in” is clear, simple and will strike a chord with those to indicate that the race is tight, but there is a large group of who worry about whether ditching the status quo could be risky. undecideds. We believe they are most likely to fall into the Remain camp when it comes to the crunch. Here is why: 6 The out camp has no similar clarity, and is unlikely to achieve it in the next four months. Leavers are riven between two world 1 The British public remains a largely cautious, pragmatic, and views. Firstly, those who see Brexit as an opportunity to create a small-c conservative entity. May 2015 was a useful reminder of Singapore style, hyper globalised liberal modern economy. this. Voting to leave requires a significant desire to depart from Secondly, those for whom it is a chance to crack down on a known, lived, reality and embrace a wide range of immigration and recapture Britain’s self-rule and sovereignty. uncertainties. Many who would regard themselves as Remain does not need to define its future, for we currently live Eurosceptics will nonetheless step back from the brink of it every day. Leave must define what leave looks like. Few uncertainty when the vote comes. undecideds will opt for an option whose own protagonists cannot agree what it means. It’s best line – Vote Leave, Take 2 David Cameron is the most trusted politician in Britain today. He Control, resonates best only with those who think and care will spend much of the next four months vigorously making the about matters of sovereignty – a minority of the public. case for Remain, as will the formidable SNP machine, and a Labour party led in this instance by the popular Alan Johnson, 7 Success for Leavers depends on being able to persuade the with Gordon Brown in a supporting role. electorate that a) we cannot at present achieve an adequate settlement from Brussels, and b) in the event of Brexit, we will 3 Lined up behind them will be a great deal of the British get the trade agreements that we need from Brussels with establishment. It has become fashionable to argue that the UK minimal fuss. The Remain camp will press at this problematic and western world is experiencing a revolt against contradiction at every opportunity. establishment elites. Corbynism, UKIP’s significant vote share in 2015, and the rise of Sanders & Trump across the pond are cited 8 At present there is a gulf in professionalism between the in support. We remain unconvinced that this really translates to Remain camp and the Leave camp. Based on our experience of a national scale in Britain. Many undecided voters will listen to signing up as volunteers for the campaigns on both sides, those who keep us safe, provide employment, run our banks Remain is doing a far better job of basic campaign organisation. (however badly...) and organise charitable endeavours. Our suspicion (and it is just that) is that those who are instinctively 9 Finally, we believe the Scottish referendum is instructive. It was anti-establishment are most likely already in the ‘Leave’ camp, an extraordinary political event that generated huge passions rather than undecided. and intense engagement from previously non-political members of the public. But even with huge passion, dedication, 4 Compared to Remain, the Leave camp is for the most part a and one of the most formidable party machine’s in living group of unpopular and unknown individuals. Nigel Farage memory, the SNP lost by a solid margin. It is hard to persuade inspires some but repels more. Michael Gove is an intellectual the British people to abandon the status quo. We believe it heavyweight, but is perhaps best known for being widely unlikely that Britain will vote for a major change on an issue loathed. Iain Duncan Smith, Chris Grayling, Kate Hoey et al are that (outside of a vocal and principled minority) arouses neither not figures with the charisma or profile to persuade and convert passion nor interest for most. in large numbers. The caveat to this argument is of course that the country’s most popular (if not most respected) politician, 10 In referendums the electorate tends to veer back towards the Boris Johnson, is for Leave. status quo as the vote draws closer, and caution really kicks in. To be really confident of Brexit, leave would need to be in a 5 Remain has a clear and resonant message that we will hear solid leading position right now. It is not, and it has a mountain again and again and again until polling day. “Stronger in, safer in, to climb. WILL WE STAY OR WILL WE GO NOW? | 3

Could we be wrong? Quite possibly. Some factors certainly point in work benefits for newly arrived EU workers for up to 4 years. This Leave’s favour. Cameron’s renegotiation patently delivered relatively ‘emergency brake’ will operate for 7 years. little, and certainly does not amount to any fundamental reshaping • Child benefit payments to families living outside the UK will be of our relationship with the EU. Boris Johnson, the most popular paid at a rate reflecting local conditions and not simply the UK politician in the country, supports Brexit, and could be worth a rate of support. couple of percent to Leave. There may be developments with the Greek economy, the refugee crisis, or a ‘black swan’ event in the The full content of the UK’s negotiated settlement can be found coming months, that pushes the electorate towards Leave. here. It is this deal that will be voted on, via referendum, on the 23rd June 2016. With both outcomes still in play, we hope that this short report helps you to understand what to expect over the coming months. TIMELINE WHAT HAS BEEN AGREED? Now the deal is done, what happens next? The Prime Minister kicked off our EU referendum after reaching agreement with other European heads of state on anew ‘ 4th March settlement’ for the UK. The campaign ‘designation’ period, in which the Electoral Commission decides which organisations can be designated as Despite scepticism about the deal, the government claims that it the official Leave and Remain campaigns starts. The decision is cements the UK’s “special status” in the EU. The negotiated deal important as the official campaigns can spend more, have covers four key areas, as follows. campaign broadcasts, free mailing and other benefits. The Remain and Leave camps have 28 days to apply. The Electoral Economic governance Commission then has up to 14 days to decide who to Cameron had sought guarantees that the UK will not be designate as the official campaigns. discriminated against as a non-Eurozone member. As well as a 15th April commitment that UK businesses in the single market will not be The official referendum period of ten weeks begins. subject to any discriminatory treatment, it was agreed that: • The Bank of England and other UK authorities will retain 5th May responsibility for UK financial stability. Elections will be held for the Scottish Parliament, Welsh • UK taxpayers will not have to foot the bill for Eurozone bailouts. Assembly, London Mayoralty, and for some local councils in England.

Competitiveness 27th May Cameron has claimed success in reaching agreement to reduce both Purdah kicks in 28 days before the vote. The government had barriers to trade, and business regulation. It claims victory in having tried to lift purdah restrictions, but backed down amidst agreed that targets will be set for reducing red tape in key sectors; concern amongst Brexiteers. securing a commitment to extend the single market in services, energy and digital; and agreement that the EU will pursue free trade 23rd June agreements with the world’s most dynamic economies. Polling day. British, Irish and Commonwealth citizens who are resident in the UK, and UK nationals who have been residents Sovereignty abroad for less than 15 years are eligible to vote. It will now be formally recognised that the EU’s aim of “ever closer union” does not apply to the UK, and the UK is not committed to further political integration. Moreover, the government claims, THE CAMPAIGNS national security issues will remain the “sole responsibility” of the The lead-up to the referendum has seen the establishment of UK, and we will decide on a case by case basis whether to cooperate campaign groups building the case for both Remain and Leave. with European partners. Over the next few months, these groups will be at the heart of the debate over whether the UK should stay in or head out of the EU. Welfare and free movement This aspect of the agreement seeks to tackle the political sensitive Remain: Britain Stronger in Europe and emotive issues around EU migrant access to UK benefits. The There is a single campaign group on the Remain side: Britain government secured agreement that: Stronger In Europe. The group launched in October 2015, has cross- • The UK will have an ‘emergency brake’ limiting full access to in- party support, is well funded and professionally staffed. 4 | WILL WE STAY OR WILL WE GO NOW?

The group is chaired by Lord Stuart Rose (former executive at Marks In part reflecting the concern among Eurosceptics that rival Leave & Spencer) and its board includes figures as varied as Conservative bodies could detract from the campaign, Grassroots Out has been peer and former Apprentice star Karren Brady, and the former TUC set up to try and unite the anti-EU groups. Established by General Secretary Brendan Barber. Eurosceptic MPs, including Peter Bone MP and Phillip Hollobone MP (and identified by a rather vibrant bright green tie), it aims to bring On a day to day basis it is run primarily by a group of former Labour existing Leave campaigners ‘to work as one in local areas’. That said, and LibDem candidates and staffers, including ex-Labour candidate it currently has a relatively unsophisticated campaign infrastructure, and think-tanker Will Straw (son of Jack), and LibDem strategists and with the exception of Farage, its leading figures have little Ryan Coetzee and James McGrory. The dominant presence of ‘losing’ popular appeal. Arron Banks and UKIP seem to have decided that advisers and candidates has caused some nerves within the pro-EU bringing Leave.EU under the Grassroots Out banner gives the best campaign, but despite their recent history, the campaign seems chance of winning the official campaign designation. effective and well run. It seems most likely that Vote Leave will win the designation as The campaign has a clear message – ‘stronger, safer, better off in’ official leave campaign, though it is possible that it will fall foul of which we will hear ad nauseum until referendum day. It is closely requirements to demonstrate cross-party support. Were Grassroots tied to the pro-EU business community and business and Out and Leave.EU to win the designation, there would be significant employment benefits of a Remain vote will feature prominently. problems for the Out camp. At present, the professionalism and campaign infrastructure of the two bodies is significantly lacking. Leave: Vote Leave, Leave.EU, Grassroots Out If the Remain camp is clearly identified with Britain Stronger In THE BATTLEGROUND Europe, the situation is currently more complicated on the Leave side. What issues can we expect to dominate the referendum campaign? There are three main out campaign groups; the Tory dominated Vote Leave; UKIP dominated Leave.EU; and a Tory founded but UKIP A Conservative battle funded outfit, Grassroots Out. Only one can be designated as the The juiciest political story will undoubtedly be Tory splits. As the ‘official’ campaign. It now looks like this will be a straight fight parliamentary Conservative party divides down the middle, between Vote Leave, and Grassroots Out working with Leave.EU in a memories of the 1990s Tory disagreements over Maastricht have semi formal merger. been rekindled.

Vote Leave is the more professional of the three, emerging out of With key leadership contender Boris throwing his weight behind the Business for Britain group. It is run by proven campaigners Leave we can expect the narrative of ‘Conservative splits’ to remain a Matthew Elliott (of the successful No2AV referendum campaign) major theme ‘til polling day and beyond. Expect the stories to get and Dominic Cummings (a leading figure in the referendum on spicier as things become more heated. Senior Conservatives have regional assemblies.) It articulates a forward thinking, globalised been keen to avoid things getting personal. But while Michael Gove vision for Britain, arguing the EU cannot keep pace with the may manage to maintain his famous politeness, there are already technological and economic forces disrupting the world. UKIP’s one signs this will remain impossible overall. Murmurings about a MP, Douglas Carswell, is a member, as are all the key Tories outers. It leadership challenge in the event of a Remain vote is an indication of has however lost the support of its main Labour MP, Kate Hoey. It the potential nastiness to come in the Conservative party, as many has a reasonably well-formed campaigning infrastructure, though is who passionately believe in Brexit realise that Cameron is prepared not as advanced as its Remain opponents. to play tough, even dirty, to defeat them.

Leave.EU is largely driven by UKIP donor Arron Banks and is more in The economy, trade and jobs – Project Fear or a leap into tune with the outlook of Farage’s party, focusing on immigration and the light the financial cost to households and lack of border control. Leave.EU Central to the Remain campaign is the argument that the UK’s is the viewed as the ‘insurgent’ and explicitly anti-establishment future economic success is inextricably bound by our membership campaign. The organisation’s primary goal at present seems to be of the EU. Just as the Tories did in the general election campaign, stopping Vote Leave from being designated the official Leave Remain will try to steer the debate onto economic territory at campaign, and its leadership regularly alleges Vote Leave is a ‘Tory every opportunity. front’ that is fighting for two referendums, rather than really wanting exit. It has given up on becoming the official out campaign itself, George Osborne has spoken of the ‘profound economic shock’ to throwing in its lot under the umbrella of Grassroots Out. come with Brexit. At a time of continued global uncertainty, the WILL WE STAY OR WILL WE GO NOW? | 5

message from the Remain camp is clear, leaving the EU is a risk the Michael Gove, the Justice Secretary and a leading Brexiteer, has UK cannot afford to take. Quite naturally, this vision is contested by suggested the negotiated deal is not in fact legally binding, however, the Brexiteers who – with some justification – have questioned a consensus appears that the risk of legal challenge is minimal. number of the statistics used to support the importance of the EU to the UK economy. …the UK votes to Leave the EU Key to the success of Leave will be in repositioning Brexit as a If Britain votes for Brexit, it would invoke Article 50 of the EU ‘leap into the light’. We will increasingly here questions about the Treaties. This is the formal mechanism for bringing about the wisdom of being shackled to Europe’s slower rates of growth. withdrawal process from the EU. This process has not been used Instead, argue the Brexiteers, the UK should prioritise developing before and as such there remains huge uncertainty about its use. its own trade deals with dynamic growth economies around the world. Building the credibility of this vision (and winning a critical What we do know is that the UK would have a two-year window in mass of business support for it) will be one key to Leave’s which to complete the withdrawal process as well as negotiating the potential success. Destroying its credibility will be equally UK’s post-withdrawal arrangements with the EU. important for the Government and the Remain camp. We can expect them to use every political and diplomatic weapon in their Given the complexity of this process, there is concern that armoury to try to do so. negotiations will not be completed. The Prime Minister used his statement to the House of Commons regarding the settlement to Migration and welfare argue that if a deal isn’t brokered within two years, the UK’s ‘current The issue of migration and perceptions regarding access to in-work access to the single market would cease immediately’ and ‘current benefits is arguably one of the most politically sensitive in the UK, trade agreements with 53 countries around the world would lapse’. and not just in terms of the EU referendum. While Cameron clearly has an incentive to emphasise or exaggerate Having secured a deal to limit in-work benefits to EU migrants the the risks, the lack of precedent regarding withdrawal mechanism Remain group will be hoping that immigration remains a low-key does create uncertainty. issue during the campaign, instead focusing the debate on trade and jobs. However, few really believe that the deal was significant in the Key questions and issues post-referendum for UK businesses grand scheme of things. Leave will try to relentlessly highlight that Regardless of whether the UK votes to Remain or Leave, UK Cameron’s deal is inadequate, impermanent fudge. businesses may need to consider some or all of the following questions: Migration and welfare issues, bound up in wider concerns of sovereignty, the refugee crisis and associated security concerns, have • How likely is Brexit? How best to interpret the polls and the mass the potential to be volatile, explosive issues in the debate. The of information and commentary about the likely results? ongoing refugee crisis will ensure a steady stream of photos, video and news on border control matters. Remain will battle hard to keep • What are the potential impacts of Brexit? the debate focused on economic security and away from migration, and its greatest fear maybe that events prevent it from doing so. • What could the political debate post a Remain vote mean for our sector? WHAT HAPPENS IF? …the UK votes to Remain in the EU • Do we have the right relationships in place to manage any change in direction caused by a Conservative leadership election? Should the UK vote to Remain, the government and the other EU members will begin the process of enacting the UK’s negotiated • Should we articulate a position on the referendum, publicly or settlement. privately?

The Prime Minister has stated that the reforms secured through the We will be working with clients to help them understand the negotiation have been agreed by all 28 EU leaders and are legally referendum, its result, its aftermath and what it all means for their binding. He believes that they cannot be unpicked without the UK’s business. If you think we could help you to manage political risk in agreement and ‘that of every other EU country’. As such, once the the coming months, please get in touch. referendum process is complete, work would begin to amend treaties to incorporate the key elements of the settlement. 6 | WILL WE STAY OR WILL WE GO NOW?

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