AS last week’s European Parliament election results in the UK were being picked over, and being misinterpreted by many, accountancy firm KPMG’s “head of Brexit” laid out the plain-and-simple realities facing businesses.
For the sake of not just the business community but also tens of millions of people whose living standards depend on hard-Brexit Tories being kept in check amid the Conservatives’ latest leadership contest drama, it is important the European election result is understood for what it is. A flurry of media coverage proclaimed Nigel Farage’s Brexit Party as the major winner. However, this seems well wide of the mark on several fronts.
For people in business, knowing their numbers, and what these figures are telling them, is crucial to their success. Something similar applies in politics, in terms of an ability to assess what the voting pattern says the electorate wants, although entrenched ideologies can make the recognition of cold realities more difficult for politicians. We have seen this a lot on Brexit.
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UK growth has been dismal as the effects of the Brexit vote have ensured further significant damage to an economy already weighed down so heavily by Tory austerity. Yet you have not seen the arch-Brexiters hold up their hands, say that leaving the European Union has turned out to be a bad idea, especially with the prospect of far worse to come, and suggest a re-think.
The UK Independence Party (UKIP) won a big share of the vote at the last European elections, when it was headed by Mr Farage, and this vote largely transferred to the arch-Brexiter’s latest political venture.
The Brexit Party built a bit on this vote but this was no great surprise, given the likelihood always was that it would be easy enough for it to attract strident Leavers from the Conservatives and Labour, those people seemingly determined to leave the EU regardless of the cost.
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Analysing the numbers, the big story on the European election results was surely the remarkable success of pro-Remain parties, notably the SNP in Scotland and the Liberal Democrats north and south of the Border. The great degree to which Scotland remains in favour of staying in the EU was a key takeaway. London too appeared impressively pro-Remain, as signalled by the success of the Liberal Democrats in the UK capital.
Yet it was a grinning Mr Farage and tales of the Brexit Party that were oh-so-ubiquitous in the overall media coverage of the election.
The Brexit Party, which did not stand in Northern Ireland, won a 31.6% share of the vote in Great Britain. UKIP won about 27.5% last time. The surge in the LibDems’ share of the vote, from 6.9% to 20.3%, is much, much more striking.
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And the Greens’ share of the vote rose from 7.9% to 12.1%. In percentage-point terms, this rise alone is slightly greater than the difference between the share of the vote achieved by the Brexit Party this time round and that recorded by UKIP in the 2014 European elections.
In Scotland, the SNP won 37.7% of the vote, up from 29% in the European elections five years ago. And the Brexit Party was on 14.8%, less than half its share of the vote in Great Britain as a whole. (UKIP got 10.4% in Scotland in the 2014 European elections).
It is so crucial to look at the actual numbers, and avoid being swept up in the hype in some sections of the media over Mr Farage, because what happens from here on Brexit may well depend to a large extent on what people believe the European election results told us. And because what happens on the Brexit front will play such a large part in dictating the UK’s economic fortunes, and people’s living standards.
The realities remain the same, but it is worth re-stating them. Even based on the UK Government’s own forecasts, there is economic damage under every Brexit scenario. The harder and more disorderly the Brexit, the greater the damage. It is a simple thing to understand.
In Scotland, the LibDems were on 13.8% of the vote in the European elections, the Scottish Green Party was on 8.2% and Change UK on 1.9%. So, taking these shares together with the huge SNP vote, a big majority of people in Scotland voted for pro-Remain parties, even before we get to the stage of trying to assess the degree to which Labour (on 9.3%) is for or against Brexit.
Turnout in Scotland rose sharply to 39.9% last week, from 33.5% in the European elections five years ago.
The LibDems’ success south of the Border is a good illustration of a broader pro-Remain surge as the UK Government continues determinedly with its Brexit odyssey.
As the European election results were being digested on Monday, KPMG head of Brexit James Stewart set out the up-to-date perspective of business. Highlighting the Conservative leadership contest, triggered by Theresa May’s announcement last week that she would step down as Prime Minister on June 7, Mr Stewart said: “The Brexit holiday that businesses might have been enjoying is now over.”
Flagging fears of a no-deal Brexit, which have weighed heavily on the pound this week as the runners for the Tory leadership have continued to emerge, Mr Stewart said: “Businesses are watching the politics with a certain amount of resignation, pondering what a new prime minister will mean for their Brexit plans and if ‘no deal’ will soon be back on the table. Few businesses are in the mood to make further provisions at this stage and most hope the leadership contest will be over quickly.”
He noted businesses were telling KPMG that Brexit “remains a huge distraction”, and highlighted the worry that important investment decisions would be delayed. Business investment has been notably weak in the wake of the 2016 Brexit vote.
Mr Stewart also highlighted retention of people with the right skills as “another area of concern”, given uncertainty around new immigration rules.
We will hear lots of Brexit bluster from Tory leadership candidates but, as the proverb has it, fine (or perhaps misguided might be better in this context) words butter no parsnips, and it is the economic realities that will dictate living standards.
Economic growth will be boosted by strong net immigration from other EU countries, not by pulling up the drawbridge, and aided by investment by businesses able to plan for the future, without having to look through their fingers as the Tories play out their drama of division.
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