What business needs to prepare for in a hung parliament

As the clock struck ten on election night, it was all over. Theresa May’s gamble had failed to pay out. The majority was lost. An unexpected swing to Labour across key and unexpected constituencies took place, offset by a strong swing against the SNP. A surge in young voters turning out and a complete collapse of the UKIP vote meant that the 42% won by the Conservatives and the 40% won by Labour no longer resulted in a landslide, but a hung parliament.

Before the election, VinciWorks published an outline of what to expect after the election from a Conservative or Labour government. Neither of those results has come to pass, so here’s what business could expect, and should prepare for, in this new reality.

A hard Brexit won’t happen

There simply isn’t a majority in Parliament for the hard Brexit that Mrs May was proposing. Cutting off British access to the customs union and single market as the Conservative party wanted looks likely to be set adrift. The Tory’s partners in Parliament, the Northern Irish Democratic Unionist Party, while themselves cheerleaders of Brexit, want a softer version and a frictionless border with the Republic of Ireland, and thus the EU.  

The problem remains that this the prime minister set her sights on a complete break from every EU institution she could think of. The mantra of “no deal is better than a bad deal” was the rallying cry. But for business, no deal IS the worst of all possible deals, threatening everything from buying and selling goods in the EU to cross-border data flows. With negotiations due to start in little more than a week, Britain is, for want of a better phrase, facing European negotiators divided, alone and naked.

Could Article 50 be paused? Or even resigned? The EU have repeatedly said they would welcome Britain back into the fold. On the Brexit front, the dust has nowhere near settled.

Parliament is going to get bogged down in the details

Say goodbye to the Conservative manifesto. In the weeks before the election, we published a summary of the Labour and Conservative manifestos and what they would mean for compliance and business. The Tories promised new cyber-security regulations, a new data protection act, more teeth for the Modern Slavery Act and a greater crackdown on tax evasion. Labour wanted to expand the Equality Act, give more rights to workers and regulate the gig economy, while significantly undermining the ability of people and corporations to evade tax.

When neither party wins, neither manifesto will be implemented in full. In other countries, a hung parliament might force the two largest parties to work closer together, as often happens in Germany. That situation seems unlikely, at least for now, but a minority government means power shifts back to Parliament. Every vote will matter. The opposition can push for a flurry of amendments on every bill and, along with the House of Lords where the government has never held a majority, ensuring little will get passed where there isn’t a broad agreement.

This might mean a zombie parliament where not much can actually happen because no one can reach an agreement. It might be good enough for normal times, giving the Tories time to find a new leader and prepare for a new election in a year or two. But Brexit has destroyed the notion of normal times. This government, unlike any other, has a countdown clock attached to it. Crucially, Brexit requires thousands of new acts of parliament and statutory instruments just to keep the last 40 years of EU law on the books.

Still, there is a busy legislative agenda to get through. The UK must pass the new Money Laundering Regulations 2017 before the end of June, not to mention giving effect to the Criminal Finances Act. A hung parliament so clearly divided over fundamental issues will not make that process easier.

Power has diffused, somewhat, to Edinburgh and Belfast

Arlene Foster, the leader of the DUP and Ruth Davidson, leader of the Scottish Conservatives might as well be named deputy prime ministers due to the undoubted influence they will now hold. Either one of them could pull their support for the prime minister and defeat or even bring down the government.

Arlene Foster increased the seats held by the Democratic Unionist Party to ten, wiping out her more moderate Unionist opposition. Sinn Fein also increased their seat total, bringing to seven the number of seats that will remain empty in the new Parliament. Theresa May is negotiating a deal with the DUP, and while their social conservatism is unlikely to feature in any agreement, their views on Brexit and benefit issues are likely to be heard in the halls of Westminster.

Meanwhile, in Scotland, Ruth Davidson has spent her entire political career detoxifying the Scottish Conservatives, leading the party to become the second largest in the Scottish Parliament and now in the Scottish Westminster contingent. Over the last few days, various reports have suggested that the new Conservative MPs north of the border will take their orders from Ruth Davidson before Theresa May. The Scottish Tory leader has already publicly drawn her red lines over LGBT rights and will probably do so too over Brexit. To get a sense of what the prime minister can achieve, the opinions of those in Edinburgh and Belfast now matter a great deal.

Things will probably look pretty different in 6 months time

Many commentators, including Conservative MPs and cabinet ministers, think the prime minister’s position is untenable. On election night it was 50/50 on whether she would resign, and while she is still in Downing Street, Labour is already preparing for a second election this year. She may get to kick off the Brexit negotiations, but it is widely acknowledged the prime minister gambled away her majority and mortally wounded her own authority.

A different cabinet, a different prime minister, or even a different coalition will change the course of what comes next. So rather than strong and stable, prepare for uncertainty and change.

How VinciWorks can help

In an uncertain world, risks can disrupt years of careful planning and have a significant impact on business. An organisation’s objectives can be suddenly curtailed, and their competitive edge can erode from poor planning and failure to see what might come next.

VinciWorks offers an Enterprise Risk Management System, a set of tools and techniques that an organisation can use to improve their chances of reaching strategic objectives by reducing and preparing for uncertain events.

ERM helps organisations achieve and maintain their competitive edge by integrating enterprise risk management into strategic decision making. Through a combination of advanced risk management software, training and advisory services, VinciWorks provides the full range of tools needed to elevate risk management culture, discover strategic opportunities and avoid operational catastrophes.

VinciWorks’ suite of risk management software is appropriate for organisations with any risk management maturity level or risk management drivers.

As the only ERM system designed by top ten global law firms, VinciWorks’ RMS provides you with the same tools used by market-leading organisations.

To learn more: www.vinciworks.com/rms