Has industry gained a greater say on Brexit after UK election? - Focus

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Predictions that last week's UK General Election would be all about Brexit turned out to be inaccurate, but it is without doubt the issue dominating its fallout. Ben Cooper assesses the likelihood of a significant change in the UK's Brexit strategy.

The UK Government triggered Article 50 on 29 March. The two sides are due to start negotiations next week

The UK Government triggered Article 50 on 29 March. The two sides are due to start negotiations next week

The General Election that was supposed to provide the UK with "strong and stable" government as it embarks on the Brexit negotiations yielded nothing of the kind. By definition, Theresa May's minority government is not strong, having fallen eight votes short of an overall majority. It is also inherently unstable. The only deal it is able to reach to keep it in power is the one it is still trying to broker with Northern Ireland's Democratic Unionist Party.

If - or when - it is agreed, this would be a so-called "confidence and supply" deal, whereby the DUP would only commit to supporting key votes, essentially the Queen's Speech, the Budget and a no-confidence vote, should it arise. All other issues would be negotiated on a vote-by-vote basis.

Historically, such arrangements have proven messy and fragile.

At any time, such a situation would be undesirable. For it to happen ten days before the opening of Brexit negotiations makes it immeasurably more serious. Traditionally abhorring uncertainty, there has been disquiet from the business community about the current political instability but, on the other hand, the inconclusive result has also raised the possibility of a change in direction on Brexit which many drinks manufacturers, in the UK and beyond, may welcome.

The DUP supported leaving the EU in last year's referendum, but differs significantly from the so-called "hard Brexit" the Government appeared to be set on. In fact, its manifesto includes no fewer than 30 provisions relating to Brexit. It stipulates that the particular circumstances of Northern Ireland's land border with Ireland must be "fully reflected" in the negotiations, and the Common Travel Area be maintained. It seeks "ease of trade with the Irish Republic and throughout the European Union", and appears to prioritise tariff-free trade and some form of customs union with the EU over new trade deals with countries beyond the EU. It calls for "progress on new free trade deals with the rest of the world", but says an objective for the negotiations should be a "comprehensive free trade and customs agreement" with the EU.

The only means by which Prime Minister Theresa May can continue to govern will be to offer concessions to the DUP

The only means by which Prime Minister Theresa May can continue to govern will be to offer concessions to the DUP. These will cover a range of issues certain to include Brexit.

It is now considered very likely the Government will have to rethink its Brexit priorities, specifically how it seeks to balance concerns over immigration against the negative impact on trade and the economy, not least because the DUP's concerns are shared by many in the Conservative Party. In particular, the strong gains by the Conservatives in Scotland mean Scottish Conservative leader Ruth Davidson now leads a powerful caucus with a view on Brexit shaped by Scottish considerations. Davidson has advocated an "open" Brexit which prioritises trade over immigration.

Gravitation towards a "softer" Brexit will certainly be welcomed by many UK drinks exporters and importers into the UK. In response to the election result, Scotch Whisky Association (SWA) chief executive Karen Betts said the trade organisation wants to see "an open trade policy" including "a comprehensive trade deal with the EU" and effective transitional arrangements.

Meanwhile, the hospitality sector in the UK is among those that would welcome a less rigid and proscriptive stance on EU immigration. Brigid Simmonds, chief executive of the British Beer & Pub Association (BBPA), said she hoped the current uncertainty can be resolved quickly, and emphasised the importance of EU nationals to the sector's workforce. "With the Brexit negotiations due to begin, I hope we can secure very swiftly the rights of existing EU staff in our sector, and begin to put in place arrangements that ensure we have access to the skills we need, and trade as freely as possible," Simmonds said.

Meanwhile, the Association of Licensed Multiple Retailers (ALMR) also stressed the importance of getting a workable government in place swiftly to provide the "clarity and certainty" that business needs.

A further comment by ALMR chief executive Kate Nicholls speaks to another defining shift in the policy environment facing UK drinks companies after last Thursday's election that could well have a telling impact on the Brexit trajectory. "The complexion of the next Government remains unclear," Nicholls said. "But, as we approach Brexit and a new Government looks to secure a new deal for the UK economy, high street hospitality businesses are going to play a crucial role. We are ready to provide our support and are looking forward to working alongside the new government at this incredibly important time."

A change in the way the Government engages externally is seen as vital for its survival

Ordinarily, this could be largely dismissed as standard government relations puff. However, the May administration has been roundly criticised for not being sufficiently inclusive in its approach to policymaking, whether in relation to Brexit or other areas. Many Conservative MPs, in particular, believe its overly-autocratic approach is a key reason for its highly-disappointing performance in the election. As much as it would be reliant on the DUP for votes, a change in the way the Government engages externally is also seen as vital for its survival, even if few expect it has any chance of seeing out a full five-year term.

This means the concerns of those Conservative backbenchers in favour of a softer Brexit, and even of those advocating remaining within the Single Market and the EU Customs Union, will receive more of a hearing, along with the particular concerns of devolved governments in Wales, Scotland and Northern Ireland. It also undoubtedly means a more influential voice for business.

It is extremely telling that immediately after the election result, business secretary Greg Clark called a meeting with leaders of major representative bodies such as the Institute of Directors and the Confederation of British Industry. Reports suggested this was to coordinate a business voice to advocate for a softer Brexit. There was thought to be a difference of opinion among the interest groups about whether the Brexit negotiations needed to be paused. What was most important about this meeting, though, was that it took place at all, and almost immediately after the election.

Greg Clark, who backed remaining in the EU last year, was subsequently reappointed as business secretary in the Cabinet reshuffle two days later.

There are too many imponderables to predict at this most uncertain juncture, and in an era of unprecedented political surprises, what the election means for the eventual shape of the Brexit settlement. It appears to have increased the likelihood for a softer Brexit, possibly even for the UK joining the European Economic Area (EEA). Staying within the EU Customs Union is a stronger possibility than it was a week ago. Above all, the chance that the May Government would stand by its view that "no deal is better than a bad deal" and walk away from the negotiations leaving the UK trading with the EU on World Trade Organization terms has receded.

That said, when the Government does begin its negotiations with the EU on Monday, it will do so with the same negotiating position it laid out in its 12-point plan published in January. The team will also still be led by David Davis, who campaigned for Brexit in the referendum, though some other departures from the Department for Exiting the EU since the election have created more speculation and added to the general feeling of instability.

What can be said with certainty, however, is that the voice of business will be among those a chastened Theresa May government will be paying much greater attention to as negotiations proceed. For those concerned primarily about the impact of a hard Brexit on trade and the UK economy, that represents a significant ray of hope in these troublingly-uncertain times.

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