THE COMMERCIAL YEAR 2015-16
Like the laws of physics, there is often a temptation to seek certainty in the cold, hard numbers of business and economics; but such certainty is generally illusory, as the reality inevitably proves more complex and – for everything from banking to fracking – what is one person’s triumph can be another’s misfortune. It is thus crucial for would-be lawyers to appreciate the interlocking interests and influences at play in the commercial world, and how business overlaps with political and social concerns. Commercial awareness involves applying your legal expertise within this context to find practical solutions to clients’ problems and help them to achieve their goals. Below we use some of the biggest stories of the past year to illustrate the multi-faceted nature of these issues and to help you start thinking like a lawyer. Don’t take headlines and statements at face value; think about where they come from and whose interests they are intended to serve, and form your own opinions by considering the facts and listening to all sides of the argument. When money and power are involved, the loudest voices are not always the most reliable. Brexit Nowhere were conflicting interests and irreconcilable differences of opinion more apparent this year than in the narrow vote to leave the European Union – easily the most seismic commercial and socio- political issue of 2016 from the British perspective. The referendum
campaign that preceded the vote was fraught with rancour and growing alienation, with both sides peddling half-truths, misinformation and outright lies in the pursuit of their interests. The outcome of the vote revealed a deep schism between those with a continued affinity for the European project and those who feel that they have been left behind by globalisation and ignored by the increasingly distant figures calling the shots. Immigration versus austerity Immigration was perhaps the defining issue of the referendum, from both a commercial and social standpoint. A considerable proportion of the public believe that the free movement of people between member states – a cornerstone of the European Union – has put untenable pressure on vital resources such as school places, hospital beds and jobs. This belief was stoked by key members of the Leave campaign, who also claimed that Britain’s EU spending was starving the NHS of funds which would be better redirected there. However, this suggestion was immediately rowed back on following the referendum; while various studies show little to no correlation between immigration and wage depression, or pressure on public services. Immigration actually contributes a net financial benefit to the UK economy and the country’s ageing population, and this access to skills is why UK and international businesses were so overwhelmingly in the Remain camp. Meanwhile, critics ranging from trade unions to the IMF have instead blamed the squeeze on the government’s swingeing austerity policies, which have resulted in years of underinvestment in infrastructure and public services. The principle of free movement and the rights of EU nationals to remain in the country have been thrown into doubt as new Prime Minister Theresa May prepares to enter negotiations with a European
Union anxious to discourage other countries from pursuing their own exits. The ultimate outcome may remain shrouded in uncertainty for some considerable time; but whatever happens, it is highly likely that a lot of people will be unhappy. Winners and losers Brexit, and the attendant plunge in the value of the pound, has already created many winners and losers in the business world. Law firms will have plenty to do for the foreseeable future across all practice areas – from competition to environment and immigration – as players in both the private and public sectors rethink their strategies and roll out new arrangements. Elsewhere, Associated British Foods, the owner of Primark, anticipates that increased profits from its sugar business will more than offset a fall in UK revenue; while companies from IT outfit Aveva to Ocado could benefit from the drop in sterling as they work to secure deals abroad. Meanwhile, the construction and real estate sectors are suffering as Brexit has depressed property sales; while banks have also been hit hard by fears for the economy and further cuts to already-rock bottom interest rates, which have made lending less profitable. Banking: a subject of interest The banking sector has been under intense scrutiny since the global financial crisis of 2008 and subsequent recession – events which the banks themselves had a major hand in causing through what the US Senate’s Levin-Coburn Report described as “high risk, complex financial products [and] undisclosed conflicts of interest”. Thanks to the weakened pound, Lloyd’s Bank has emerged as one of the biggest losers from the Brexit vote, while Royal Bank of Scotland – which, like Lloyds, was bailed out by taxpayers during the financial crisis – has said that the government will have to wait
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