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EU Referendum: Brexit and the Implications for Brands

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No political question has captivated businesses in the same way as the British referendum on European Union membership (aka Brexit).

In this deck, two Ogilvy politicos to dive into the referendum, implications of a potential #brexit, and to advise on communicating around the outcome.

Mathew Shearman, Senior Account Manager at Ogilvy Healthworld London and James Stewart, Associate Director at Ogilvy Public Relations London cover:

- Perspectives on the challenges facing clients
- Recommend Brexit priorities for businesses and Leaders
- Deep-dive on implications for the pharmaceutical industry

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EU Referendum: Brexit and the Implications for Brands

  1. 1. Brexit? And the future of business Mathew Shearman, Senior Account Manager at Ogilvy Healthworld James Stewart, Associate Director at Ogilvy Public Relations THE EU REFERENDUM Thursday 16th June 2016
  2. 2. Associate Director Ogilvy Public Relations James StewartMathew Shearman Senior Account Manager Ogilvy Healthworld
  3. 3. WHAT IS THE UK ACTUALLY VOTING ON? ECONOMIC UNION Single market, not the Euro POLITICAL UNION 28 member states SOCIAL CHAPTER Worker conditions
  4. 4. Council  of  EU: 28 relevant ministers – 1 from each country Also review law EU  Commission: 28 members 1 appointed by each country They initiate law They debate together EU  Parliament: 751 elected MEPs – the UK has 73 Scrutinise and debate law Debate again No law Law is passed AGREE? AGREE? AGREE? no yes yes no no yes yes THE MAKING OF LAW IN THE EUROPEAN UNION
  5. 5. STATE OF THE CAMPAIGN KEY CAMPAIGN ISSUES: •  Immigration •  Economy CAMPAIGNS TRENDS: •  Conservative Party division •  Labour are (relatively) united, but are Labour voters? •  Young people want to remain, but will they vote?
  6. 6. A TURBULENT UK/EU RELATIONSHIP 1st Jan 1973 2004 1975 1989 2013 23rd  June  2016 1992
  7. 7. 7 DAYS TO GO Graph: http://whatukthinks.org/eu/opinion-polls/poll-of-polls/ (accessed 15/06/16) 48% 52%
  8. 8. A GENERATIONAL DIVIDE 60 years + 18-24 years Graph: http://www.economist.com/blogs/graphicdetail/2016/05/britain-s-eu-referendum (accessed 15/06/16)
  9. 9. THE BREXIT PROCESS ARTICLE 50 24th June - Autumn 2016(?) RENEGOTIATION 2016-2018 Specific trade deals Contribution to EU budget NEW RELATIONSHIP ??
  11. 11. SINGLE MARKET The impact on the UK economy will depend on changes to access to the single market or new free trade deals. •  The single market removes barriers to trade and investment within the European Union •  The European market is declining and trade deals such with India may be more quickly formed •  Different assumptions: •  Anticipated drop in £, economic growth between 3% and 6% lower •  Boost from regulatory burden – 1.6% GDP? •  Maintain the single market with legal harmonisation and EU budget contribution?
  13. 13. FOCUS ON LIFE SCIENCES A UK priority area
  15. 15. A LIFE SCIENCES PERSPECTIVE EFPIA says that as part of the EU, UK pharmaceutical companies can continue to benefit from: EU Marketplace Pan-European R&D collaboration EU advocacy on global trade issues Harmonised regulatory environment
  16. 16. LIFE SCIENCES IN THE UK The UK is a high exporter & importer of pharmaceuticals: $34.5 billion $34.7 billion EUUK
  17. 17. 400 0 -400 -800 -1,200 -1,600 -2,000 2 0 -2 -4 -6 -8 -10 DRUG SPENDING DECLINE FORECASTED Following a projected dip in GDP, pharmaceutical sales to the NHS would decline: Figure 2: Change in forecast pharmaceutical sales, UK Change in pharma sales, Brexit scenario compared to baseline (£m); left scale % change vs non Brexit scenario; right scale Source: The Economist Intelligence Unit forecasts 2015 2016 2017 2018 2019 2020 259 -1,223 -1,707 -1,664 -398 2016 Pharmaceutical sales: £18.7 bn
  18. 18. THE SINGLE MARKETING AUTHORISATION The UK currently has a role on the Committee for Medicinal Products for Human Use (CHMP) For medical devices, the CE mark gives access to the UK market Pricing of treatments is a national responsibility – NICE plays a role on the European Network for HTA (EUnetHTA) Potential impact on domestic drug access and launch sequencing. HARMONISED REGULATORY ENVIRONMENT
  19. 19. CLINICAL TRIALS: FROM INVESTMENT TO ACCESS The UK is currently the top country for phase 1 trials, 2nd for phase 2 trials. The UK receives the second highest financial contribution from Horizon 2020 – EU research funding. EU public/private partnerships, such as the Innovative Medicines Initiative (IMI), ensure collaboration across borders Regulatory burden shift for companies with UK-specific protocol? PAN-EUROPEAN R&D COLLABORATION
  20. 20. WHAT WILL HAPPEN AFTER THE REFERENDUM? And how should business respond?
  21. 21. What will happen after brexit? NOBODY KNOWS
  22. 22. BUT… WE CAN ASSUME There will be a period of turbulence while the political and business environment come to terms with the result •  The British financial markets will drop and the pound will fall in value •  David Cameron will resign – Boris Johnson would be favourite to replace him •  Significant pressure will grow for Scottish independence Britain will be forced to renegotiate its relationship with the EU •  Will the UK join the single market? Will the EU let the UK join? •  How will the EU react to Britain negotiating trade deals having left? The British government will have to establish how it replaces role the EU plays in the UK e.g. research fund like the Horizon 2020 There will be changes to travel and working rights for EU citizens in the UK
  23. 23. HOW SHOULD BUSINESS RESPOND? Businesses will be under pressure to assess the impact of Brexit and make business decisions on this information: •  Vital to monitor the political environment immediately after the result Likely to be a spate of companies announcing changes to British operations: •  Many listed companies will announce plans in Q2 reports •  Narrative likely to develop about businesses / investment drying up Risk that companies seen to rush out will be subject to customer / governmental impact Opportunities for corporates to influence government agenda / Brexit negotiations if done carefully Don’t only worry about your British business – the EU will be facing its biggest crisis yet
  24. 24. BUT EVEN WITH A REMAIN VOTE THERE WILL STILL BE CHANGES The political dynamics in the UK will have changed: •  Conservative Party divisions •  UKIP increasingly able to attract former Labour voters Britain will resist further EU centralisation and may veto new members joining Likely to be a referendum on any further EU treaties
  25. 25. THANK YOU For further information, please contact: Mathew Shearman Mathew.shearman@ogilvy.com James Stewart James.stewart@ogilvy.com