What Does Lancashire & The North Need To Do If The UK Votes Leave?

shutterstock_374884033There is vast noise surrounding this referendum and most people with opinions seem very certain of the right thing to do.  I am far from convinced that enough thought has been given to what we (business and public leaders in Lancashire and the North) actually do on 24 June if the British people vote to Leave.

On announcement of a vote to leave, the Westminster village will ferociously navel gaze as politicians squabble and plot to decide on the new Prime Minister and Cabinet.

Meanwhile enormous decisions will be needed on key areas for real people where policy has in effect been agreed with the EU for decades – especially:

–          Agriculture
–          Fishing
–          State Aid
–          VAT classifications
–          International trade
–          Movement of labour

We have no idea what the party elected into government (or indeed any other political party) would actually want to do in these areas following a Leave vote.

We can expect that the Scottish Parliament, the Welsh Assembly, the London Mayor and the government in Northern Ireland will immediately be putting teams together to lobby intensively to look after the interests of their constituents.

It is probably worth looking at the two of these issues where there has at least been a volume of commentary in the referendum discussions: international trade and movement of labour.

We know that there will be acute uncertainty on international trade until the terms of our new relationship with Europe have been agreed.  Many commercial supply agreements run for several years and uncertainty over how they will be regulated will not help Northern exporters at all.

The civil servants in the trade team in London will have to agree not only trading terms with the EU but reach replacement agreements with every country we currently have a deal with through the EU.  This will be a new experience for almost all of them and risks being very time and resource pressured.  It is a very challenging idea that this group of bureaucrats in this situation are going to agree deals that are balanced, fair, look properly after the interests of the whole country and in total better than the existing agreements.

On the topic of movement of labour it is worth noting that from a business perspective skills shortages are the leading restriction on business success.  Changes in the movement and availability of labour could have very significant impacts on business.  There are two credible (and completely contradictory) suggestions on how migration will change after the referendum: – either there will be a rush of new EU migrants seeking to take advantage of the opportunity to work in the UK before the rules may change and they may be barred; or existing working migrants within the UK will immediately start looking to leave so that they can establish themselves with a job somewhere with a degree of security.

Either of these is likely to be bad for Britain, with the second in particular likely to be worse for Lancashire as it is would deepen the skills shortage and likely lead to a greater flow of talent from here to the initially higher paying economy in London.

In addition to the huge new areas where we need political leadership following a leave vote, there will be great new challenges on the Treasury.  The disruption caused by leaving the EU is almost certain to slow growth in the short term, placing additional pressure on the deficit.  There is also an additional gamble on the availability of funders for the deficit at our historically low interest rates with the additional uncertainty of leaving the EU.  While George Osborne has missed every target he has set himself since he became Chancellor, it is far from clear that a new head of the Treasury would be able to deal with these problems more effectively, especially with an unclear political mandate.

In summary, the changes which will come from a Leave vote will give vast power into the hands of London civil servants and policy makers.  We in Lancashire and the North will need to commit a lot of time and resources and be at the top of our game to make sure that the decisions that are made are fair to us and not just for London politicians.  Leaders of all opinions, backgrounds and parties will need to work together immediately to make sure the North of England gets the deal it deserves.

David Gorton – Senior Partner