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How the UK Elections Will Reverberate Across Europe and the Global Economy

May 28, 2015

By: Nicholas Blake, Associate, Client Relations

When a new President moves into the White House, it is custom that the United Kingdom’s Prime Minister is among the first world leaders to offer their congratulations. Although the 2016 American presidential race is just starting to heat up, we know that David Cameron will be the one dialing 1600 Pennsylvania Avenue to welcome the new American President in January 2017. His re-election will surely reverberate with his American counterpart as well as impact the future of European and global affairs.

On May 7, voters across Britain delivered a resounding victory to incumbent Prime Minister Cameron and his Conservative Party, which virtually no one anticipated. Pundits and pollsters alike predicted a razor-thin divide—and potentially lengthy coalition negotiations—before we could say who would occupy 10 Downing Street. Instead, the Conservatives shocked Britons by increasing their number of seats in Westminster and seizing an absolute parliamentary majority.

Even more surprising was the Labour Party’s unexpectedly poor performance. Pre-election polling equated the party’s leader Ed Milliband’s favorability rating to that of Prime Minister Cameron, and most predicted a toss-up for who would lead the largest party in the new Parliament. Instead, Labour lost 24 seats and is searching for a new leader.

Labour’s losses were most devastating in Scotland, which has historically been one of the party’s most loyal strongholds. The Scottish National Party (SNP)—which raised its public profile during the Scotland independence referendum last year—won nearly every seat it contested and mostly at Labour’s expense. Scottish politician Mhairi Black, a 20-year-old university student who stood as an SNP candidate and unseated Douglas Alexander, an 18-year veteran of Westminster, would have been Britain’s Foreign Minister had Labour won. The SNP rose to become the third-largest party in the UK and will continue its fight for greater autonomy from a position of strength.

The only person who had a worse night than the pollsters was Nick Clegg, the now-former leader of the centrist Liberal Democrats. In less than 24 hours, he went from Deputy Prime Minister—by virtue of a coalition government with the Conservatives—to just one of eight Members of Parliament (MPs) from his party. The Liberal Democrats ultimately lost 49 of their seats, making them Westminster’s fourth-largest party, which led Clegg to resign as leader.

David Cameron’s triumph will have enormous implications for the future of public policy in the UK and across Europe. Within Britain, the Conservatives’ program of austerity now commands a much stronger public mandate. Wary of alienating potential coalition partners, the Conservatives were mum on specific policy proposals during the campaign. Now free of the need to placate Nick Clegg and the Liberal Democrats, the Conservatives will have more space to ratify ambitious legislation.

Outside of the UK, David Cameron’s victory may shape the future of the European Union (EU) for years to come. Cameron has promised to hold an ‘in-or-out’ referendum on the UK’s membership in the EU by 2017, but has not ruled out an earlier date. His victory and commitment to the referendum leaves room for the opportunity to win greater concessions from his counterparts in Brussels. Pro-EU Liberal Democrats had hoped to influence the referendum’s timing and language in coalition negotiations, but the Conservatives are now free to set their own terms. If British voters do decide to leave, the EU will lose one of its largest economies and most influential members. At the same time, the US could also lose out in the event of an early British exit from the EU. The UK is the bloc’s strongest advocate in favor of the Transatlantic Trade and Investment Partnership (TTIP), the free trade agreement currently under negotiation between Brussels and Washington.

While British public opinion splits on the question of EU membership, foreign leaders and a majority of British business leaders believe that leaving the EU would have a negative impact on the UK. Increasingly, Brussels is becoming the center of decision-making in Europe, which is a primary contender in the global economy. Companies like Google have shown that they ignore EU regulators at their own peril, as Brussels’ “Euro-crats” set standards that reverberate across the Atlantic and throughout the global economy. The UK—quite possibly the EU’s most business-friendly country—has long been a fierce ally for these major companies that have transnational interests, particularly those within the financial, consumer goods and defense sectors. Without the UK commanding a seat at the table in Brussels, the scales would likely tilt further in favor of greater commercial regulations.

As globalization expands the centers of power beyond Washington, public affairs professionals must be ready to help their clients win on political, regulatory and commerce-based issues that extend beyond borders. Now that we know who the major players in Brussels will be for the next several years, the stage is set for Europe to move forward on critical reforms and a legislative agenda. It should be an interesting few years.

With experience and presence in the world’s leading capitals—including London, Brussels and many others—DDC is well-positioned to deliver for its clients wherever they face regulatory or legislative challenges.










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