Monday's Musings: The Post #BREXIT Analysis, What's Next?


UK Referendum Highlights Displeasure With Political Elites

With almost 52% voting to leave, the surprise results of the June 23rd, 2016 referendum highlighted the 40 year shift from euro-centric to euro-skeptic among the average UK citizen (see Figure 1).  While many will attempt to blame the outcome on an ignorant non-urban voter, the results showed how much discontent the average citizen has for the political and financial elites.  The vote was more than a protest vote on globalization and immigration.  In fact, the vote highlighted how the European Union had failed to improve the average non-urban UK citizen's lives.  The vote also showed how the political elites could no longer bribe voters into submission that the EU was more positive than negative to the average UK citizen.

Figure 1. A Look Back At The European Referendum From 1975 to 2016

Screen Shot 2016-06-26 at 10.10.15 PM

Keep Calm And Carry On.

At this point, nothing has changed, yet. While the value of the pound sterling continues to surpass a 31 year historic low and over $2 trillion has vanquished in world markets, the following facts have not changed:

  • The UK is still part of the EU until Article 50 of the Lisbon Treaty is invoked and up to 2 years beyond that while exit negotiations are in progress or longer should the majority of the EU states provide an extension
  • The process may take up to two years to complete and at this moment, nothing is final
  • Existing trade agreements and policy have not changed
  • Freedom of movement as expressed in Article 45 remains in play
  • Over 80,000 pages of law must be undone or renegotiated
  • 2.2M EU citizens will still be able to work in the UK for the next 2 years

Strategic Planning Assumptions Must Consider Continued Unrest And Nationalism Within The Euro Zone

While the power vacuum among the UK parliament adds to instability over the next three months, organizational leaders can expect the UK to lay out a longer term plan and time line much needed to calm markets.  However, the BREXIT referendum has emboldened non-incumbent EU political leaders to push back on globalization and immigration.  Renewed calls for nationalism have spread among the EU member states.   Constellation expects continued instability among European governments over the next 12 months.
Constellation believes that in the current set of conditions:

  • An European wide slow down will continue over the next 12 months until stability has been achieved
  • UK companies with a global headquarters will benefit from a weaker Pound Sterling
  • Financial services firms will consider moving HQ from UK to Frankfurt, Paris, or Amsterdam, however, nothing will match London's prowess as the financial capital
  • Pharm firms will consider moving HQ from UK to Switzerland, Germany, or Ireland
  • CPG firms will consider moving HQ from UK to Amsterdam or Paris
  • Tech firms will consider moving HQ form UK to Ireland as many have already located data centers and R&D
  • Overall VC investment in the UK will remain at a stand still over the next six months.

Apply The PESTEL Model To Systemic Analysis

Constellation's research team uses a tried and true futurist framework that looks at the political, economic, societal, technological, environmental and legislative (PESTEL) shifts ahead. The PESTEL model is used to synthesize the major trends and provides guidance on how Constellation approaches its  key business themes.  The strategic assumptions from Constellation’s PESTEL framework form the basis for the business theme-led research.
From that model, Constellation sees a few larger themes in the political side for 2016 that must be factored:

  • Politicians attempt to address jobs and growth but have inadequate tools and time
  • Short term fixes no longer good enough
  • Post revolution still does not yield hope
  • Western democracies continue to buy votes with debt funded services
  • Extremism grows around the world
  • Populace demands new models to address trust and transparency among a winner takes all market

With these assumptions in place, organizations must then consider how these political attributes impact:

  • The future of work
  • Next gen customer experience
  • Matrix commerce
  • Digital safety and privacy
  • Tech optimization and innoation
  • Digital marketing and sales effectiveness
  • The new C-suite

Bottom Line: Digital Disruption Has Not Been Kind To The Average Citizen

Political elites in western democracies have failed the average Joe and Jane with policies that have not improved their quality of life.  Moreover, they can no longer buy votes with other people's money in the form of a free tax break, trade deal, legislative ruling, healthcare, housing, food, or hand out.  Most western democracies are running dangerously high debt to GDP ratios.  Almost 55% of the Fortune 500 was in the red in 2015.  This digital disruption has not just created a digital divide, but also created stark winners and losers.  The social contract is broken.   Those left out of the growth and globalization have voted their conscience and from their consciousness.  While there may have been no plan for post revolution progress, this was the the digital shot heard around the world.
Moving forward, global leaders must rethink the social contract in creating a playing field that equalizes the opportunity and access to the gains in digital disruption.  From education to new network economy, leaving a majority of citizens behind will no longer be a viable option.  Those countries and organizations who do not change can expect to be changed through unrest, revolt, and revolution.  Leaders must create a design point for inclusion, so that humanity can overcome this social unrest and give each individual a fair opportunity (not outcome), and erase the lopsided gap in digital winners and losers.

Your POV.

Ready for prexit? Let us know what your experiences have been and feel free to reach out.  Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) org.

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