It’s a tired old statistic that 44% of UK exports go to EU countries, but it remains a hugely significant consideration in the upcoming negotiations.
Even if EU-UK trade falls after Brexit, a great many British companies (around 10% by most estimates) will depend on the continued loyalty of the EU consumer. And while this may be a minority of individual businesses, most exports tend to originate from the type of large multinationals that contribute a generous slice of the UK’s GDP.
For these businesses, the ability to export will mean continuing to abide by European standards for goods and services. Without offices in Brussels or investment in new government relations staff, British companies will have very little influence over the EU laws and regulation that affect their business day-to-day.
This will require a fundamental change in their government relations strategies. Come April 2019, the UK Government – which has been instrumental in pushing for free trade vehicles like the Capital Markets Union – will at best lose its formal ability to influence EU policy and at worse be treated as a pariah, having used up all goodwill with the EU27.
Some companies plan to rely on UK trade associations to represent their interests. Many groups, to their credit, are taking action to prepare their members for Brexit with roundtables, surveys and position papers. But by necessity the majority (78%) of British trade associations’ activity is targeted at the national level (Whitehall and Parliament) with a minority directed at European stakeholders. As a result these groups are valuable, but they can’t replace boots on the ground.
At an EU-wide level, many UK exporters and trade associations are members of umbrella lobbying groups. These organisations currently provide a useful conduit to Brussels, but it would be a big mistake for companies to assume this avenue will be open to them post-Brexit.
It’s true that so far none of these groups have put UK organisations on notice. However, the position of British companies and trade associations is far from clear. The leading EU-wide industry groups all prohibit companies without a registered presence in an EU member state from full membership rights.
Some, such as the Euro Banking Association or the European Sea Ports Organisation, offer ‘associate’ membership for non-EU companies, but this does not come with voting rights on the group’s policy positions, rendering them near-useless as a lobbying tool.
There are also many different criteria for what qualifies a business as having European operations. For CEFIC, which represents the chemicals industry, full membership requires companies to own production facilities within the European Economic Area. Whereas at DigitalEurope corporate members must not only prove they are a ‘significant player’ in the European market, they must also be members of at least one national trade association within a member state.
Under the current rules, once the UK leaves the EU techUK, the voice of the British technology sector, will not be eligible for membership of the Europe-wide body. This means that only businesses that are members of national trade associations in another of the EU27 will have their interests represented by DigitalEurope.
Of course it’s possible that the rules of these organisations could be amended to allow ‘EU+UK’ membership criteria. Unlike many European Union agencies, industry groups don’t tend to receive money from the Commission, so there are unlikely to be restrictions that would prevent them from representing the views of non-EU companies. In fact, some groups have already set up ‘Brexit taskforces’ to help work out their response to the UK’s decision to leave.
But this shouldn’t provide much security for businesses. At this stage, we simply don’t know what sort of access EU-wide industry groups will grant to UK companies. And with a protracted negotiation ahead of us, we don’t know what will motivate the influential actors within these organisations come 2019.
Can London-based firms rely on the German Chair of the Euro Banking Association to stick up for the City when Frankfurt stands to gain from Brexit? Perhaps. But banks are uncertain enough to be making plans to improve their representation in the EU.
Currently, the British lobbying industry is underweight in Brussels. Many of our industry groups have no permanent representation in Brussels, whereas the German Retail Federation alone has five full time lobbyists.
Clearly, if the UK is to continue to trade with the EU on favourable terms this will have to change. But it will take time and investment to establish an influential presence in Brussels, especially at a time when ‘brand Britain’ elicits scepticism on the continent.
Measurement and evaluation