EU Referendum Briefing: Final Result

BREXIT ANALYSIS – PRESENTED BY EDELMAN

EU REFERENDUM

23 JUNE 2016

MMO O N NT HTH S S

DAYS DAYS

FINAL RESULT The United Kingdom faces a new chapter in its relationship with the world following yesterday’s historic vote. When judging what this new relationship will look like, it is prudent to take stock of what we know at this stage, and what too are the ‘known unknowns’.

So what do we know? We know that the country, by a small majority, has voted to exit the European Union and that the decision is deeply divided across the nation. Indeed, the split in sentiment defies all established political conventions. England and Wales, excluding London, are strongly in favour of today’s final outcome. Scotland and Northern Ireland, deeply opposed. The potential for this outcome to further polarise the nation will be one of the most important considerations for the new Prime Minister.

Speaking of which, another thing we know: despite promising to stay on, David Cameron has announced he plans for a new Prime Minister to be in place by the Party Conference in October. And we know who the frontrunners for this race are, with Boris Johnson and Theresa May leading the odds. We also know that the Conservative Party has a history of electing the ‘underdog’ in its leadership races, but also that it has never conducted one in such peculiar circumstances.

And finally, one of the last important things we know is how the markets will react. Despite fluctuations, the

overarching trend will be a reduction in international investment resulting in a slowing of economic growth, pushing the new Government to reassess its fiscal objectives when monetary policy is at the limits of what is prudent and sensible.

Moving, perhaps more positively, to the most significant ‘known unknowns’. We do not know how the rest of Europe and the EU will react to today’s decision. While the EU may wish to demonstrate how uncomfortable leaving its membership can be for nation states, it may also wish to use the vote to revisit its own purpose and to reflect on some of the causes of the UK’s decision. This may make a better European Union than the one Britain has decided to leave, one which is more acceptable for its increasingly concerned members.

We also do not know how Parliament will respond to today’s decision. We know that the majority of MPs support continued membership, but that the new Prime Minister will almost certainly be elected on a Eurosceptic platform. This could present an interesting democratic tension, and one which may require a redefining of the debate if we, as a country, are to move forward.

Lord Myners is the Chairman of Edelman in the UK, providing senior strategic counsel.

OVERVIEW The UK voted to leave the EU by a margin of 51.9% to 48.1%. Scotland, London and Northern Ireland were the only regions of the UK to vote to remain in the EU. The dynamics of the result suggest one of the decisive factors was the support of many traditional Labour voters for leaving the EU – indeed, the Leave camp swept all of Labour’s traditional strongholds in the North of England, Midlands and Wales. Mirroring the General Election result, the Remain campaign was only successful in liberal, metropolitan parts of the UK, especially London and affluent parts of its commuter belt, and in Scotland.

Again, much like in the General Election, the result demonstrates that campaigns which are reliant on younger voters are likely to face defeat. Turnout, at 72.2% was much higher than anticipated by many, but it was not driven by a surge in younger voters –

but instead driven by higher than usual turnout in many traditional Labour areas, and by a huge turnout in rural communities. The referendum is further evidence for the tendency that contrary to widespread assumptions higher turnout boosts the vote for the right.

The result is also vindication for the strategy of the Vote Leave campaign. While it was derided by some commentators as a “core vote” strategy, their focus on linking EU membership to concerns about immigration, and their consistent messaging to “vote leave, take control” proved that rather than being a narrow strategy, it was simply a clear and effective one. Again, the parallels with the Conservative approach in the 2015 General Election are clear.

Gurpreet Brar Managing Director, Public Affairs

Insights into the EU Referendum If you are interested in receiving further insights on Brexit and the EU Referendum, please contact Gurpreet Brar on gurpreet.brar@edelman.com and 020 3047 2466 for further details

Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2000 | @edelmanUK

THE LEADERSHIP RACE – Man Overboard What a difference a day makes. Last night as the final polls came in a subdued Nigel Farage appeared to be getting his excuses in early, conceding that Remain were likely to “edge it”. Less than 12 hours later and the country is reeling from its decision to leave the European Union and the dramatic resignation of the Prime Minister from the steps of Downing Street.

So where does this all leave the Conservative Party and the governance of our country for that matter?

David Cameron has announced that he and his Cabinet will stay on and “steady the ship” until a new leader is announced by Conservative Party Conference in October. But make no mistake this is man overboard

and with it perhaps the modernising, One Nation Conservative Party that was finally winning elections and beginning to steal the centre ground from Labour.

So now the battle for the heart and soul of the Conservative Party will commence as the Parliamentary Party decides which two candidates to put forward to its members. Having led the right of his Party to victory over Europe, Boris Johnson now has a better chance than ever to make it onto that ballot.

Behind closed doors, Cameronite Conservatives will be scrambling to coalesce around a candidate mighty enough to take Boris down.

Emily Poole Account Director, Public Affairs

THE (IMMEDIATE) POLICY AGENDA It’s easy to forget, but just a few weeks ago there was a Queen’s Speech – as it turns out, David Cameron’s last. The Government’s programme for the next year was set out. Is the Speech now not worth the goatskin it was printed on?

Mr Cameron did mention the Speech in his pre-resignation statement this morning and said that he would be taking forward the legislation announced in it. There were some meaty proposals – not least substantial reform of the prison service and far-reaching measures on public health. But there must now be a huge question mark as to whether any of it can be delivered in practice.

David Cameron’s majority was thin even before this vote, and his backbenchers restive. With his authority shot to pieces and his Ministers manoeuvring in the race to succeed him, the political energy required to take forward controversial measures such as the sugar

tax (and indeed the wider Obesity Strategy) may simply not be there.

Issues which unite Conservative MPs - measures on the digital economy, for instance, or Trident renewal – may still be able to be proceeded. But when it comes to major decisions such as airport expansion, these will be bound up closely with what comes next. Boris Johnson has said that he could not be part of a government which authorised Heathrow’s third runway; Mr Cameron could take the decision now in advance of a reshuffle, or delay it entirely and leave it as a hospital pass for his successor.

The level of uncertainty is high, and the inward focus of the political parties means that we can expect the business of government to slow to a painful crawl.

Saratha Rajeswaran Associate Director, Public Affairs

BREXIT PROCESS & THE NEW MODEL FOR THE UK The Prime Minister has stated that he will leave his successor to enact Article 50, with the process of the UK’s exit now including the leadership race.

The process will include: 1. A new Prime Minister is elected, by Conservative Party Conference 2. The new Prime Minister holds consultations with business, the Bank of England, the Cabinet and other relevant organisations to decide upon a preferred future relationship with the EU 3. The UK government triggers Article 50 – either at the end of this year or early in 2017 4. The European Commission seeks a mandate from the European Council to undertake negotiations on UK withdrawal from the EU – all other member states must agree to guidelines for negotiation 5. The European Commission will then undertake negotiations with the UK to agree its withdrawal from the EU. Existing EU Treaties will remain in place 6. The withdrawal negotiations are subject to a 2 year deadline (June or July 2018) 7. If an agreement has not been reached by this point, the EU Member States must agree unanimously to extend negotiations or the UK will immediately leave the EU regardless of whether a replacement relationship is in place.

8. If a deal is reached, it requires approval from the European Council (by qualified majority: 20 out of 27 Member States) and the European Parliament.

The period between the election of a new Prime Minister and the triggering of Article 50 will be critical in

determining the terms of the UK’s new relationship with the EU that we will seek – and during this time, business, trade unions and other organisations will be expected to make clear their views regarding the best future relationship with the EU. The main options are: Norway-EU agreement: gives significant, but not total, access to the EU Single Market – in return, the UK would be required to accept freedom of movement, wide ranging EU obligations and contribute to the EU budget Swiss-EU agreement: close to the Norwegian model but with only partial access to the Single Market in goods and more limited access in services. In return the agreement gives Switzerland greater legislative freedom from the EU Canada-EU agreement: a more detached relationship with the EU, with significantly less Single Market access than the Swiss model, but free from obligations on free movement of people and contributions to EU the budget Turkey-EU agreement: a loose free trade agreement with some sector-specific access to the Single Market World Trade Association membership: the default fall-back option, marking a decisive break from EU membership

Harry Spencer Account Manager, Public Affairs

Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2000 | @edelmanUK

What it means for labour Labour’s support for Europe has always waxed and waned, but at a time when it is utterly divided on most other issues, it had seemed broadly united behind Remain. In the wake of Brexit, the fallout within the party will be stark – and Jeremy Corbyn can expect to take the brunt of the criticism.

Labour MPs may now be emboldened. The PLP is famously reticent to move against its leaders and has held back because of Corbyn’s mandate, but now all bets are off. Letters are circulating and MPs will be taking one another’s temperature for a coup.

Monday’s PLP meeting could see a motion of no confidence or calls on Corbyn to quit.

Corbyn has never been a fan of the EU. His comments during the campaign that he was “7, 7.5/10” for Remain and that he saw no limit on immigration seemed almost calculated to give Leave a boost. He seemed more interested in the Postal Workers Directive than on making the European case.

Rob Newman Senior Account Manager, Public Affairs

Conservative Leadership Contest Rules Conservative leadership elections follow a two-stage process. First MPs vote on a number of candidates to determine the final two candidates. Members of the Conservative Party then vote for one of these two candidates, with the winner becoming the new Leader of the Conservative Party, and in this case, Prime Minister.

When a contest is triggered, a deadline is set of 12pm on a forthcoming Thursday for the Chief Whip to receive nominations from MPs for candidates.

Candidates require the support of just two Conservative MPs to be nominated.

Assuming that more than two people are nominated, then Conservative MPs will vote for the preferred candidates in a series of ballots, held every Tuesday and Thursday after nominations close, until there are

only two candidates left. In each round, the candidate with the fewest votes is eliminated, though others may also drop out.

The Conservative Party’s membership then chooses between these two MPs in a postal vote. The length of time members have to respond to the postal ballot is not strictly defined, but is usually substantial – a period of 4-6 weeks is likely.

Given the Prime Minister indicated he would seek to have a new Leader in place by the Conservative Party Conference, it is likely the parliamentary phase of the contest will take place before the summer recess, with the postal ballot in September.

Anthony Marlowe Director, Public Affairs

REACTION “I fought this campaign in the only way I know how, which is to say directly and passionately what I think and feel, head, heart and soul - I held nothing back…. The British people have made a very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction.”

David Cameron, Prime Minister

“Dawn is breaking on an independent United Kingdom” Nigel Farage MEP, Leader of UK Independence Party

“We are well prepared for this. The Treasury and the Bank of England have engaged in extensive contingency planning and the Chancellor and I have been in close contact, including through the night and this morning.”

Mark Carney, Governor of The Bank of England

“The past years have been the most difficult ones in the history of our union, but my father used to tell me: what doesn’t kill you makes you stronger.”

Donald Tusk, President of the European Council

Insights into the EU Referendum If you are interested in receiving further insights on Brexit and the EU Referendum, please contact Gurpreet Brar on gurpreet.brar@edelman.com and 020 3047 2466 for further details

Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2000 | @edelmanUK