Every end is the beginning of something new. The UK and the rest of the world woke up last Friday to the news that, despite the confidence from the Government and financial institutions, the unimaginable had happened – the UK population had decided to leave the European Union. Within hours of the announcement, the Prime Minister had resigned, the FTSE had dropped and the pound sterling had crashed to a 30 year low. This has also led to a period of volatility in the energy and other financial markets but these are slowly stabilising.
Whilst the financial markets have a tendency to react excessively in such moments, it is often the case that this settles as new dynamics emerge. The G7 central banks have taken steps to ensure adequate liquidity and to support functioning of markets. The Bank of England has also affirmed that it will take all necessary steps to meet its responsibilities for monetary and financial security. It has assured the world that it is monitoring developments closely, has undertaken extensive contingency planning and is working closely with HM Treasury, domestic authorities and overseas banks to ensure stability.
The European Union leaders issued their own statement declaring that the result was not what the majority of members wanted but affirming their position that they respect the decision of the UK population and pledged to manage the transition as smoothly as possible. Global leaders have spoken of their continued support of both the UK and EU. President Obama has declared that both will remain indispensable partners of the United States and Putin said Brexit would have both positive and negative consequences for Russia and the rest of the world but that he expected markets to stabilise from the initial shock.
Until Article 50 of the Treaty of Lisbon is activated, the UK is a full and continuing member state of the European Union. When the Government issues its notification, the UK will still bound by all EU treaty law for two years including all the rights and obligations it enjoys as a full member. With regard to environmental policy, the fact remains that all laws derived from the Energy Efficiency Directive are enshrined in UK Law. Any changes or repeals will require direct action from the Government and there have been no announcement to suggest that this is imminent or likely.
There is considerable speculation that other member states will follow the UK’s lead; a claim that the President of the European Council has been keen to dismiss. He has been vehement that the remaining 27 political leaders are committed to unity and, whilst the past few years have been the most difficult for the Union, he steadfastly believes that ‘what doesn’t kill you, makes you stronger’.
What is clear is that the UK will remain a member state until at least 2018; there is no provision in the Treaty for the other member states to expel the UK under any circumstances and there is a substantial amount of negotiation to undergo before there will be any clarity on what the future holds. There is also no legal obligation for the UK Government to act on the outcome of the referendum and developments within the European Union may unfold that makes membership attractive to the population once more.
After months of alleged scaremongering failed to sway public opinion, the world must now take a step back and adopt a period of reflection. It is now for politicians to negotiate a deal with the European Union that preserves the capacity of UK companies to trade without obstacle with the remaining member states. It must be remembered that, even after exit, the EU will continue to be our largest trading market and the closest destination for export. The UK is also a key market for the EU which European companies will also want to preserve. Whilst it is easy to get caught-up in the emotions, both positive and negative, it is vital that business leaders remain calm and carefully assess the impact of the outcome of the referendum. We must not lose sight of the fact that UK businesses are resilient and, with creativity and resourcefulness, they will weather this storm but for the time being the UK is still an EU member state and must act accordingly.
There are still a huge number of concerns across all sectors of the UK and a division in opinions. One comment that flooded social media last Friday summed up the general feeling: ‘So far we’ve lost our place in the European Union, a prime minister and £200billion from the stock market and it is not even lunchtime.’ There is also a great deal of discussion on the referendum both home and abroad with many speculating whether the UK will actually leave the EU. The Polish leader has declared that the UK should have a second referendum – but only when the EU has reformed to the point that the British people want to stay.
The months ahead are going to be a testing time for business leaders and it is vital that they have the confidence that the Government will unite both parliament and the country to focus on maintaining stability while a new relationship with the EU is established. Only time will tell if the UK voters have made the right decision but for now, it is very much business as usual for UK commerce.