09 Jun 2017

UK election casts a shadow over Brexit

Lawyers are speculating whether the UK's shock election results will soften the approach to Brexit whilst also saving the Serious Fraud Office which was under threat from the government.

Mykhaylo Palinchak

City lawyers are predicting that the UK shock election results will have a major impact on the Brexit negotiations. Baker McKenzie trade partner Ross Denton says other UK parties will become more influential in setting an agenda for the Brexit negotiations and force the Government away from the Lancaster House plan. He says that one possible softening could be that the UK remains part of the Customs Union. 'This will reduce the barriers faced by UK businesses dealing with the EU-27 but will also drastically reduce the UK's ability to negotiate trade agreements with third countries. As the UK will likely lose the benefit of over fifty trade agreements when it leaves the EU, the inability to negotiate new trade agreements may be a significant reason not to remain in the customs union.'


He adds that a further softening might open up the possibility that the UK moves into the EEA either as a full member or with some associate status. 'However, membership of the EEA does not appear to be consistent with the referendum, since the UK would likely have to pay for membership, have to accept free movements of workers, and have little or no say in the development of laws.'  Mr Denton does not believe that the UK could withdraw from Article 50.  He says a second referendum is 'of course something that will be raised. However, as we have served the Article 50 notice, and the balance of opinion is that the UK cannot withdraw that notice unilaterally, that would be a very dramatic change in direction, and would face strong opposition from elements of the Conservative Party.'

Brexit delays

Nicholas Evans, Parliamentary Agent and Head of Public Law at Bircham Dyson Bell, says that 'Any change in government following the outcome of the election would unavoidably result in delays to the Brexit process. The negotiations have been scheduled to begin on 19 June. With a hung Parliament, both the Lords and the Commons will expect to exert a greater influence over the Brexit process. If a coalition government or some other looser arrangement is formed between the Conservatives and DUP, the Lords can legitimately argue that any measures not included in both parties’ manifestos is outside the scope of the Salisbury-Addison convention. The lack of a majority in the Commons may also mean that the Government has to compromise on more issues, potentially requiring it to allow Parliament a greater role in the negotiation process.'


Baker & McKenzie partner Tim Gee sees the result having an impact on M&A and deal making. 'Sterling will stay relatively weak, so the capital cost of UK assets will remain attractive. Brexit will be softer, but only marginally. The uncertainty index remains high. But uncertainty is precisely the environment in which M&A creates most value, as companies can achieve business growth or business model change most rapidly. Our own M&A forecast is up.' 


Meanwhile white-collar crime expert David Corker, partner at law firm Corker Binning, sees the result as saving the Serious Fraud Office which has been proposed by the prime minister. 'Corbyn’s election success has surely sunk any chance of Mrs May’s ill-starred proposal to merge the SFO with the NCA. Losing the SFO would be a serious blow for the UK’s anti-fraud and corruption capability.'