Into the abyss: Analysing the debris of brexit

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Our political philanthropist filters through the debris of our EU exit

Few weeks can have been more politically tumultuous than these ones. They have witnessed the UK vote to leave the EU, the resignation of the prime minister and almost the entire shadow cabinet, and uncertainty about ‘union’ itself. Not to mention the rise and fall and rise again of political big beasts such as Boris Johnson and Nigel Farage. And then – with devastating speed and ruthlessness – a new prime minister, new cabinet in post and hints at some significant policy change.

The normal circumstances surrounding this type of political upheaval would be dominated by the need to calm the Brexit waters. Though Theresa May has stated that ‘Brexit means Brexit’ – and politically it will be vital for her to demonstrate that she can make the new economics of Brexit work – Philip Hammond, the new chancellor, warned that this project may take six years to complete.

 

Economic

The leave vote has triggered vortex waves around the economic system – both here and abroad. Economies are largely based on consumer confidence, and it takes little to burst that bubble, with repercussions occurring across every area of business. When people stop spending money – either on the high street or in the form of foreign investment – the effect is felt from the top of the property market down to the sole practitioner and first-time buyer.

It was unsurprising that David Cameron’s last Prime Minister’s Questions in the Commons would be a schmaltzy affair, but the utter disarray unleashed by his failed political gamble across UK business, was very apparent.

The urgent priorities, one vaguely recalls from the pre-referendum world, such as the financial crises at the NHS and in social care, housing shortages and many others, will now fall in line behind the urgent need to settle the macro uncertainties of Brexit. Perhaps the most unfortunate consequence will be if May’s new policy agenda is not given enough air time.

Advocates of small government and driven by austerity, the Conservatives have in recent years overseen a massive slimming down of the civil service, but will now need to create an enhanced bureaucracy to replace the functions currently undertaken at European level. Central government is likely to grow in the short term at least and this will need to be funded.

Meanwhile, a radical rethink of economic policy will be required to stave off recession, restore market confidence, protect the UK as a home for investment and reinforce its position as a leading financial sector. The pound is likely to remain weak at least over the next two years, meaning UK exports will become cheaper, but imports more expensive. This will have implications for pharma pricing here, where the product originates outside the UK and is denominated in a currency other than Sterling, when bought by the UK affiliate.

Part of the radical adjustment is likely to revolve around making the UK an attractive place to do business. Cuts in areas such as corporation tax, tax breaks to encourage investment, taxes on financial dealing transactions, taxes that disincentivise non-doms and tax breaks focussed on the life sciences sector are all on the cards.

These will need to be funded by spending cuts and/or tax rises in areas that are seen as less mission-critical. Any savings from leaving Europe will not be realised until the UK actually leaves, so there will be a medium term shortfall between the tax cuts, needed to avoid recession, and the availability of the clawed back funding from Europe, which will become available in two to three years’ time.

The leave campaign has, of course, admitted that significant additional funding will not be made available for the NHS as a result of the leave vote, so there will not be spare money to spend on drugs, diagnostics and other interventions.

 

Claudia gets technical…

We are watching product licensing processes – notably, EMA, mutual recognition and CE marks. These may continue as they are, or be replaced by a new UK system, while the remainder of Europe continues with the original form.

The UK has often been at the forefront of drives for improved regulation in healthcare, and been at the heart of moves for more co-ordinated cross-border pricing and health economic evaluation. It The UK’s influence and impact on these areas may now proceed at a slower pace.

Another interesting aspect is whether US companies, which have often used the UK as one of its two tester markets for new technologies – Germany being the other – still place value on our systems and shared language. 

It is unclear if there will continue to be free movement of people between the UK and Europe, or whether quotas will be applied to limit the number of Europeans able to hold UK jobs. Any clamp-down on this may seriously hinder the ability of companies with European centres to move staff in and out of the UK.

Primary European head office bases in the UK will be scrutinised to assess whether they would now be better situated in other European countries. Meanwhile, orphan drug legislation, and the incentives that accompany this, may be under threat, especially given NHS England’s concerns around the cost of those drugs, and the patient and data protection that goes with them.

There will be financial implications of having to deal with safety, efficacy and pharmaco-vigilance systems where the UK will now have to be treated differently and, presumably, at extra cost.

Ultimately, it may be that scant change will result, since the UK has been a major player in creating the content of technical regulation, so any future stipulations in the UK will mirror the current position in Europe. PRIME and other European adaptive licensing processes, however, would no longer carry weight in the UK and we may lose the benefits that these bring.

Cross-border scientific co-operation and standards, plus the existing European funding that goes to R&D – drawn in by what is recognised to be the UK’s high standards – is likely to be called into question. Indeed, recent reports indicate that UK scientists have already been dropped from EU projects, or are stepping away from new applications, as they and their UK institutions are considered a financial liability.

In these unprecedented times, the uncertainty for companies, large and small, will doubtless herald risk and opportunity.  Those at the cutting edge of government policy will be doing their best to advise and strategise effectively. 

Claudia Rubin is a Government Affairs Strategist at Decideum. Go to decideum.com