General election 2019: what it means for Brexit and businesses

Date : 17 December 2019

The general election of 2019 has resulted in a majority for the Conservatives, who have gained 47 seats, taking 365 out of 650 House of Commons seats, a majority of 80.

This majority is unusually large, by historical standards, giving Mr Johnson great freedom of action in Brexit and in other matters, assuming that Conservative MPs remain loyal.

Mr Johnson has been appointed Prime Minister and invited to form a new government. There have been minor changes to appointments, but a full reshuffle is not expected until next year.

Positions relevant to Brexit and to business operation remain unchanged, ie:

  • Dept for Business, Energy and Industrial Strategy – Andrea Leadsome
  • Dept for Environment, Food and Rural Affairs - Theresa Viliers
  • Dept for Exiting the European Union – Steve Barclay
  • Dept for International Trade – Elizabeth Truss
  • Foreign and Commonwealth Office - Dominic Raab
  • HM Treasury – Sajid Javid

All Conservative candidates committed to support the revised Withdrawal Bill before the election. The profile of Conservative MPs has therefore been changed by the election, ”Brexiteers” replacing “Remainers”1.

With a working majority, the Government is now in a position to pass the Withdrawal Bill, giving effect to the deal agreed with the EU in October 2019.

Mr Johnson has indicated that he will move to pass the Withdrawal Bill as soon as possible, with the aim of delivering Brexit by the new deadline of 31st January 2020.

The Conservative majority means that there is now a high chance that the Bill will pass, at least in the Commons, although Opposition parties may attempt to slow the process or make amendments.

Assuming no upsets or obstacles in the House of Lords, the Courts or the EU Parliament (which must also ratify the deal), it is likely that Brexit will occur on 31st January 2020.

If so, the UK and EU will move into transition arrangements, which will last until the end of 2020. In this period, the UK and EU will maintain “business as usual” in most areas related to trade.

This time will be used to conduct trade talks which will finalise the relationship between the UK and EU.

New trade deal

The Conservative manifesto gives some broad aspirations for the new trade deal; this may be intended as a starting point for negotiation, but key points include:

  • No UK membership of the EU single market
  • No UK / EU customs union
  • No common UK / EU fisheries
  • No jurisdiction in UK for EU courts
  • No free movement between the UK and EU

If this “wish list” is achieved, then there would be significant change for grocery businesses that trade between the UK and EU.

A key issue is the question of product regulation (eg: environmental standards, labelling rules) – these are especially complex in the area of agri-food.

Although the two sides begin the process in close alignment, talks may still be lengthy and complex – EU negotiator Michel Barnier has warned that a full deal may not be possible before the transition period ends. A temporary “quick fix” deal may be possible, lasting until work is completed.2

Government activity

Government departments have been quiet throughout the election campaign, in-line with “purdah” rules but IGD anticipates an increase in Brexit-related announcements in the days ahead, as government returns to normal.

The general slant of preparations may change however. Before the election campaign, government was planning for “no-deal”, or “hard” Brexit. Now, the assumption may change to Brexit on the terms of the Withdrawal Deal.

IGD will remain engaged with government and with trade organisations on Brexit preparation.

Business managers should also remain alert for a new budget (date not set), accompanied by a new report and forecasts from OBR.

What this means for grocery businesses:

  • Transitional arrangements should help to limit the business impact of Brexit – the risk of delay and disruption at the UK border is reduced, at least with respect to January 2020.
  • There is, however, still risk of trade disruption when transition arrangements end – “no-deal Brexit” may yet occur. Even if a deal is done, some changes should be expected.
  • Another key issue for grocery business is the terms of any trade deal – historically, the EU has been fairly protectionist, regarding agri-food. Businesses must pay close attention to the detail of what is agreed.
  • Although the election has eliminated some political risk, for businesses and for citizens, IGD anticipates that instability and uncertainty will remain, perhaps influencing spending decisions into the future
  • Brexit is a key polarising force in UK politics and society, but not the only one. Businesses remain at the front line of cultural change, with many citizens hostile or suspicious
  • Businesses must continue to develop ethics and purpose, in order to allay suspicion and insulate themselves from unfavourable public opinion

(1) The Guardian, 17th Nov 2019
(2) Daily Express, 30th Oct 2019

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