Beyond Brexit

A view of the UK’s decision to leave the EU from within organisations

The High Court’s decision that the Government cannot trigger Article 50 without parliamentary approval and a vote by MPs could help some UK business leaders sleep easily, according to Henley Business School’s latest research.

An analysis of 450 senior managers and directors’ views on Brexit reveals that there is significant apprehension over the potential damage caused by the vote to leave, in particular for the retail sector. Although some organisations believe there will be little or no change, a significant number anticipate an exodus of talent and other unforeseen consequences.

The study finds that UK retailers are 75% more concerned than the manufacturing and engineering sectors that Brexit will damage their business; and 30% more concerned than the banking and financial sectors.

This suggests that the High Court’s actions may prove a reassuring stop-gap for those who see the judiciary as acting in the interests of safeguarding democratic values and parliamentary sovereignty.

Different opinions on Brexit between citizens in the UK and EU additionally indicate:

• Brexit has started to have a detrimental effect on business (47% of senior executives are concerned vs 25% of middle managers)
• Brexit is likely to make it harder for existing non-UK nationals to remain in the UK (91% of EU citizens in the UK agree vs 56% of UK citizens)
• Brexit makes the break-up of the UK more likely within the next 10 years (86% of EU citizens in the UK agree vs 57% of UK citizens).

There are currently more than 30 separate parliamentary inquiries into Brexit – 18 in the House of Commons and 13 in the House of Lords – and this is all before the new ‘Exiting the European Union Committee (DExEU Committee)’ formally begins its work.

To fully appreciate the context of how these outcomes may impact governance and organisational decision-making in the run up to 2018, it is worth considering just how much British commerce relies upon its interrelationship with the EU.

UK and EU dependencies

The UK economy is currently valued at £3.04 trillion and has national debt of £1.7 trillion. This is serviced by debt interest payments of £43 billion every year.

UK tax revenue is £681 billion, of which over 30% is contributed by London. UK exports to the EU hover at around 44% and EU exports to the UK are a mere 3% in comparison. Finally, within the UK there are 5.4 million SMEs employing 15.6 million people.

Retaining skills

Over three million people living in the UK (5%) are citizens of another EU country. Two-thirds of these are working (7% of UK employment). There are just over one million UK citizens working in other parts of the EU (less than 0.1% of the EU). Job security, travel and living post-Brexit are other critical concerns for non-UK nationals, raising questions over how the UK can attract and retain skills in the short term, and empower education for industrial sectors in the longer term.

Competitiveness

Post referendum, organisations are facing detrimental effects on the British Pound, which impacts everything from the price of imported goods through to the cost of everyday food items. Retail supply and demand features short product cycles and perishable shelf-life, making the sector open to high levels of volatility in the supply chain and external market lead times.

The recent Unilever vs Tesco stand-off showed once again that retail is highly sensitive to market fluctuations. For the wider population, if a higher proportion of income is spent on food, the growing gap between rich and poor becomes more likely.

A nation divided

The study ultimately reveals a divided nation. The groups profiled are separated within organisations by seniority, levels of education, age and gender. Well-educated, upwardly mobile and senior executives have greater concerns about the future of industry post-Brexit. Despite this there remain contrasting positions and interpretations that vary between directors and managers.

For the time being, UK governance jurisdiction remains distinctly attractive to corporations and most large SMEs, yet the bulk of government revenue depends heavily on a narrow middle class and individual wealth channeling.

Ethical leadership

All of these findings highlight issues that are critical to longer-term successive strategies for both the UK and EU in terms of crafting organisational leadership direction proactively. Recommendations on potential actions include:

• Building assurances for EU organisations and citizens working in the UK
• Addressing skills and competitive advantage more fairly
• Identifying sector specific help and guidance on internationalisation
• Facilitating well informed dialogues
• Pro-active and principled governance between government, business and society.

Governance, policy and decision-making at this critical time demands greater leadership accountability and a commitment to incremental innovation to foster national change.

‘The UK’s Exit from the European Union’ survey details are available directly from the authors, Professor Nada Kakabadse – n.kakbadse@henley.ac.uk and Dr. Nadeem Khan – nadeem.khan@henley.ac.uk

Professor Nada Kakabadse is Head of the School of Marketing and Reputation at Henley Business School