With the Brexit countdown underway, the UK has a huge amount to negotiate with the EU. While numerous issues ranging from immigration to trade have been widely discussed, one important matter that has been overlooked is the impact of Brexit on corporate lobbying.
In the wake of Brexit, lobbyists will swarm London, just as over 30,000 of them have swarmed Brussels over the years. As a member of the European Union, the UK deferred significant chunks of its law making to EU institutions, from the environment and agriculture to health, trade and banking. Now that the UK is “taking back control” of its laws, London will be the place to be to try and influence the laws and regulation that will affect businesses.
The EU lobbying industry, whose size exceeds €39 billion, will be significantly disrupted by Brexit. Lobbying is a strategic tool used by firms to influence laws that are potentially unfavourable to their bottom line from being passed and pushing through legislation that will boost their profits. As well as changing the industry’s landscape in Brussels, Brexit will also have knock-on effects on the level of political engagement by companies in the UK.
The UK government’s lobbying register, which woefully covers less than 4% of the 4,000-plus lobbyists in the UK’s £2 billion lobbying industry, reveals that the number of registered lobbyists increased from 117 in 2015 to 150 by December 2016. The number of lobbying contracts also surged from 664 in the first half to 704 in the second half of 2016, after the Brexit vote. Clearly, the corporate sway is already in gear.
Businesses are in desperate need of advice on government relations; hence some law firms have created specialised Brexit units to cope with the demand while some former government officials have taken up lobbying jobs to help firms shape UK policy.
Meanwhile, British lobbyists in Brussels are finding it difficult to get jobs in the aftermath of Brexit, perhaps due to the expected waning influence of the UK in European matters. Consequently, these lobbyists may return to a booming lobbying market at home.
Big pockets, big influence
There will be significant costs for firms that want to wield regulatory and policy power, with money required to persuade politicians and the voting public to support their goals through various means. So those with deeper pockets will have bigger influences.
Many local and foreign firms in the UK will jockey for influence, which will increase demand for lobbyist services and culminate in higher costs of doing business. Costs will be particularly higher for British multinational enterprises with operations in Europe, as they will have no choice but to duplicate lobbying functions in Brussels and London in order to maintain some influence in both UK and EU markets.
With Brexit negotiations set to be contentious, the two-year period within which the UK will extricate itself from the EU is a window of flux when firms, in their bid to influence EU and UK MPs, will rack up their highest lobbying costs. UK firms in Europe might even have to dig deeper into their pockets to get fair hearings from the EU which, allegedly, has already began to isolate the UK. The high lobbying costs could further diminish the prospects of Britain’s businesses supporting the government’s effort to secure a good trade deal with the EU.
If future UK laws do not mirror existing EU ones, UK firms will incur additional costs in training managers and employees to grasp and understand any changes in regulatory jurisdictions. And if care is not taken, previously taken-for-granted EU regulations could lead to errors and heavy punitive sanctions for firms.
When elephants fight, the grass suffers
In the battle for influence, there is a high likelihood that small firms will be squeezed out of the post-Brexit policy process due to the high costs involved and the limited voice they will have in Westminster. There might be instances of corporate dystopia where large and resource-endowed firms unfairly dominate the political agenda. Though this has always been the case in the UK, it is more serious now due to the number and significance of the policies that have to be formulated or revised.
It therefore behoves the UK government to fulfil its promise and create a level and transparent playing field for all firms, otherwise a few elephants will kill the grass that is the source of livelihood for many British people. Small and medium enterprises (SMEs), which account for the bulk of the UK’s private sector, will likely suffer as a result. So not only will the lobbying boom be potentially bad for democracy, but also for the large number of small firms that form a vital part of the UK economy.