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Impact of Brexit on Businesses: Digital Marketing

There’s been a lot of talk about Brexit over the past couple of years and, as the initial deadline of March 29th rapidly approaches, we’re going to give you a breakdown of the details you need to know.

One of the key problems with Brexit, even at this late stage, is that much of it is still speculation. The reason for this is that there has still been no agreement. However, there are now approximately 4 options:

  1. Leave with No-Deal
  2. Extend Article 50
  3. Revoke Article 50 (end Brexit and remain in the EU)
  4. Leave with May’s Deal (or a variation of).

So what is the likely outcome?

Prediction

Remain is the most likely outcome. The reason for this is that with no agreement between the Conservative government, parliament and the EU (not to mention the House of Lords) in sight and the March 29 deadline less than 2 weeks away, Theresa May will be forced to call for an extension of Article 50. If she does this, she’ll still have to negotiate a deal with the EU, who have so far been unwilling to compromise on their first agreement with Mrs May, which parliament voted against. However, to add even more pressure, the EU have said that they will only extend Article 50 if there is a particular reason to do so.

A simple thing such as not reaching an agreement is not a valid reason, as a no-deal agreement could be triggered. A valid reason, on the other hand, would be either to call a general election or a second referendum. In the case of either of these, the EU could agree to extend Article 50 until after the votes have been cast and the results are in, after which time, the UK parliament would have no choice but to act on the will of the voters. With a general election incredibly unlikely, that leaves Theresa May with no choice but to hold a second referendum.

If a second referendum is held then the arrangements will have to go through parliament. With so many politicians against a No-Deal Brexit and against May’s deal, they will most likely never agree to a referendum where the vote is between No-deal or May’s deal. Therefore, to appease parliament enough to agree to a referendum, Theresa May will have to make concessions. The proposed concessions so far are to take No-Deal off the table and bring Remain on. UK citizens would then be asked to choose between Theresa May’s deal and Remain. If this happened, even the majority of diehard Leavers would vote for Remain because May’s current deal means that the UK would lose all power within the EU while still being subject to many of its rules and regulations.

Breakdown

There are effectively 4 options:

  1. Leave with No-Deal
  2. Extend Article 50
  3. Revoke Article 50 (end Brexit and remain in the EU)
  4. Leave with May’s Deal (or a variation of)

However, 1,3 and 4 are not really options, and here’s why:

1. Leave with No-Deal: This won’t happen because parliament will block it as the vast majority of MPs don’t want a No-Deal Brexit.

3. Revoke Article 50 (end brexit and remain in the EU): This won’t happen because of democratic principles. Stopping Brexit without a 2nd referendum would be a step too far even for diehard Remainers.

4. Leave with May’s Deal (or a variation of): This won’t happen because Theresa May’s deal is the worst of both worlds. It means that the UK isn’t free from the EU but isn’t a full member with powers and rights. Also, because the EU now know that 1) Leave with No-deal is off the table, they have everything to gain from the UK remaining in the EU and nothing to lose.

So that leaves us with option 2:

2. Extend Article 50: The EU has said that they will only extend Article 50 to achieve a particular aim. This includes a general election or a second referendum. Theresa May will never agree to a general election as she could, and most likely would, lose, after which she’d go down as the worst Prime Minister in British history. Alongside this, she has already given her word that she wouldn’t fight another election, meaning that if she called one, she would lose the support of her own party. This leaves us with a second referendum.

A second referendum still isn’t a good thing for Theresa May, but it’s the best of a bad bunch. While it would annoy a large part of her party, she can spin it in her favour to some extent by sidelining the blame. To do this, she would have to make it look as though she was forced into it by the will of parliament. To do this, she can put a motion before the House asking for a question on a second referendum to ‘break the impasse’. Once this is done, the house will back it, as the majority of MPs in the House of Commons want a second referendum.

There is one unlikely scenario in which Britain could viably leave, however, it’s still more likely to result in remain. This is if there were 3 options on the table in the event of a second referendum.

If voters are given the choice of No-Deal, May’s Deal or Remain, then there is a chance that a No-deal could happen. However, with the potential for a split in leave voters, the majority would likely go to remain. For example, if 45% voted for No-Deal, 7% for May’s Deal and 48% for Remain, remain would win, even though 52% actually voted to leave.

The problem with this option is that it splits the leave vote and consolidates the remain vote, subsequently increasing the chances of a remain outcome. Because this would be unfair, the Electoral Commission would almost certainly not allow it. Therefore, there are 2 options left. May’s Deal or Remain. And the vast majority would vote remain.

* Even if the EU agrees to extend Article 50 without needing a particular aim, the same situation as described above would still apply, just with a delay.

In short, Theresa May is running down the clock with one thing in mind, a second referendum.

As you can see, it’s pretty complicated, but at this stage it’s difficult to see how Brexit can be resolved in a way that would result in Britain actually leaving the EU. However, if by some miracle there is a No-Deal Brexit, then this is what it might look like for digital marketers.

Data-Flows

In the event of a No-Deal Brexit there could be issues with how data flows between the EU and the UK, as well as the UK and other nations. However, it’s important to remember that in many instances, the UK law will not necessarily change straight away. This is because many EU laws have already been added to the existing UK legal framework. Therefore, GDPR would be set to stay under a No-Deal arrangement.

According to Chris Combemale, Group CEO of the Direct Marketing Association (DMA).

“The GDPR has been implemented in the UK via the Data Protection Act 2018 which will remain the law in the UK. However, without an adequacy agreement in place, UK businesses and other organisations would need to find an alternative route to retain the free flow of data with the EU. We believe the UK cannot retain its position as a global leader in data, technology and marketing if we do not have an Adequacy deal on future data flows with Europe.”

Combemale is a little more pessimistic on the subject of what will happen should a No-Deal Brexit come into place. According to him “a no-deal Brexit is antithetical to the interests of the data and marketing industry as a whole. A no-deal on data would cause immediate and complete ceasing of UK data-flows with EU countries, a practice through which enormous amounts of business is conducted. Indeed, 75% of the UK’s cross-border data flows are with the EU. Having lobbied this position for months, we know that the government understands the ramifications of this. We shall continue to impress upon the government and our EU partners the importance of getting a deal on data.”

If you read this as a business owner, then you might be thinking, “Wait, they’ll completely cut my data off from the UK straight away?” The answer is, no. As far as I’m aware, there is no kill switch for data-flows between the EU and the UK and if there is it’s a little worrying and serious questions would have to be asked about why.

The coming weeks could prove me wrong, however, neither the EU nor the UK has shown much competence in the handling of the negotiations, therefore, it’s reasonable to assume that, in the event of a No-Deal Brexit, there’ll still be a lot of work to do and it won’t be smooth sailing. However, if all of a sudden after the decision has been made, all of the negative predictions were right and the UK and EU face untold crises, then it’ll be interesting to see how both powers tackle the backlash.

Once again, I could be wrong, but the UK pulling out of the EU is little more than a mammoth amount of paperwork that no one really wants to deal with. There will obviously be some changes, but how many still remains to be seen. However, until that point, it’s probably not worth worrying about. On March 30th, it will still be business as usual, regardless of the outcome. It would take too much effort and too many resources to effectively stop everything in an instant, and it would do neither party any good. Once a decision has been reached, it will take time to implement a strategy. Once that’s in place, then the relevant guidelines will be issued telling you exactly what you need to do.

Key takeaway:

A No-deal Brexit could affect the data and marketing industry as a whole as “UK businesses and other organisations would need to find an alternative route to retain the free flow of data with the EU”. How quickly this may happen though is hard to say and there won’t be an instant block set up.

The Digital Single Market

The Digital Single Market (DSM) forms a central role in the EU’s Single Market agreements. As it stands, Europe is currently the largest export market for the UK’s digital services, something which is made possible by the DSM. This means that a No-Deal Brexit could affect areas such as e-commerce, data protection, broadcasting, copyright and privacy.

Once again, there is the potential for risk in these areas, although the likelihood of actual losses in these areas is unclear. In the very worst case scenario, UK service providers in these areas, such as on-demand platforms, shopping/e-commerce etc. would find themselves completely cut off from the EU markets. A much more likely and hopeful scenario is that there will be a long transition period as new regulations are drawn up, giving companies enough time to deal with what needs doing.

It’s important to remember that cutting ties overnight is not beneficial for either side. However, at this stage, the threat of cutting ties is useful as the EU try to prevent Britain from leaving. So much of what has been said on the issue of Brexit has for the most part been scaremongering.

For those who don’t want Britain to leave the EU, it makes sense to pull out all of the stops when it comes to worst case scenarios. As for Brexit supporters, it makes equal sense for them to provide a sunshine and rainbows approach to what will happen after. The actual realization, if Brexit goes ahead, will more likely be somewhere in the middle. It will require a lot of time, planning and bureaucracy, but it won’t be the end of the world and it won’t be the gateway to paradise. It will just be a nation-state withdrawing from an agreement and establishing new deals. Which is what it was supposed to be all along, just without all of the fuss.

Summary

If the political momentum carries on as it is doing, Britain will not leave the EU. However, if by some miracle the UK does leave, then measures will be put into place accordingly, but this will not happen overnight. On March 30th, the world will still be turning and businesses will still be ‘businessing’. So for now, as the old saying goes ‘keep calm and carry on’.

NB. This article was initially written prior to the second vote on May’s deal in the Commons on March 12th. Predictably, Theresa May lost by a considerable margin. However, a slightly smaller margin than before, meaning she may press for a third vote. Although, if she does, she is still unlikely to get a majority, meaning that all of the above is still true as of the date of publication.

Amendment: No-Deal Brexit is now off the table, leaving the only two viable options as Remain or May’s Deal. (Or if May loses power then the next PM’s deal, although at this stage the EU hold all the cards and will not renegotiate.)

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