Procurement Leaders

What Does the UK's New Prime Minister Mean for Procurement?

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What a few weeks it’s been for business.

 

The UK voted to withdraw from the European Union, leading to the pro-remain prime minister, David Cameron, standing down, and a battle to crown his successor.

 

All in all, it has been a rocky road and so news of a new prime minister brings a sense of relief and much-needed stability to the nation.

 

Following the announcement on 11 July that Theresa May will assume the keys to 10 Downing Street, the sterling made strong gains against both the dollar and the euro.

 

A new leader can bring some renewed certainty and so it seems the country is beginning to recover from the initial post-Brexit slump, which saw the pound plummet to the lowest rate in 31 years.

 

With a more stable pound comes more stable exchange rates and happy news for businesses reliant on outsourcing or supplies raw materials and products all over the globe.

 

Tasked with seeing through the Brexit vote, May’s ascension brings some clarity to the country’s negotiations with the EU.

 

But, what can we expect to see from May and what will this mean to businesses?

 

The remain game

In the run-up to the referendum, May sat firmly in the remain camp. Yet for the “remainers” wishing for a second referendum or an outright refusal to invoke Article 50 of the Lisbon Treaty, the mechanism for any member state that wishes to leave the EU, would be naïve to think the UK’s new leader will simply brush the issue under the carpet.

 

“Brexit means Brexit and we’re going to make a success of it,” May has pledged.

 

And for the “leavers” unhappy being dealt a hand where Brexit is triggered by a “remainer”, they needn’t worry; May is unlikely to adopt a softly-softly approach.

 

In fact, she has promised to run a tight ship, stressing on numerous occasions that she won’t attempt to reverse the decision of the British people, despite her personal views. The second-ever female UK prime minister is even expected to create a new, separate government department to take charge of Brexit.

 

 

The single market

"We should make clear that for the foreseeable future there is absolutely no change in Britain’s trading relationships with the EU or other markets,” May said last month.

 

For the time being, it is business as usual, and while this doesn’t mean walking blindly into the uncertain future without implementing a risk mitigation strategy, the procurement function should not shy away from building new supplier relationships across the continent or renewing contracts with existing strategic suppliers. After all, May has said she won’t trigger Article 50 until next year, meaning it is unlikely the UK will quit the EU until at least 2019.

 

And when the big day does finally arrive, trade should hopefully be at the top of the agenda for the PM.

 

May has emphasised the importance of retaining – as much as possible – access to the single market: “It must be a priority to allow British companies to trade with the single market in goods and services," she said.

 

The financial services sector, in particular, is expected to welcome this news. Banks registered in the UK currently benefit from a “passport” to offer services across the EU. Retention of the UK’s single market status is key to keeping these privileges.

 

May herself worked for the Bank of England and as a financial consultant for several years, so it is hoped she has an acute awareness of the importance of the single market to the industry.

 

Freedom of movement

Theresa May and immigration: the two words tend to go hand in hand given her almost one-woman eight-year campaign to extradite convicted terrorist Abu Hamza from the UK to the US.

 

So it comes as no surprise that she will take a tough standpoint on the freedom of movement and aims to crack down on the volume of migrants coming into the UK from the rest of the EU.

 

“I’m very clear that Brexit vote gave us a very clear message from people, that we couldn’t allow freedom of movement to continue as it had done hitherto,” May said on 3 July.

 

"We need to bring control into movement of people coming into the UK from the EU."

 

If she follows through with this stance, the ability to hire skilled workers from within the EU may well become a sticking point for procurement.

 

But something might have to give and May will be unlikely to see the likes of Angela Merkel and Francois Hollande roll over and play ball to policies whereby the UK takes what it wants from the single market but pushes back against immigration.

 

So, for all these intentions, the future is not yet entirely clear.

 

This article is a piece of independent writing by a member of Procurement Leaders’ content team.

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