Brexit: 100 days later

One hundred days on from the referendum, how much of the pre-Brexit world has ended? How much is still the same? And how much is still shrouded in uncertainty? Utility Week investigates.

On 24 June and the days that followed, REM must have seen a bounce in the charts because the band’s 1987 hit It’s the End of the World as We Know It surely filled the airwaves. It certainly fitted the mood of many individuals and businesses as the reality of the Brexit vote hit home.

One hundred days on, and how is the new world shaping up?

The economy bore the brunt of the initial shock from the referendum result. Sterling plummeted to 30-year lows, Britain’s AAA rating was lost, and billions of pounds were wiped off the FTSE 100. However, as traders realised the vote had changed nothing for markets in the immediate term, shares recovered.

Politically, seismic shifts have occurred. In a post-referendum whirlwind, David Cameron first stood down as prime minister and then left Westminster altogether when he abruptly quit as an MP. Meanwhile, a short Conservative party leadership race saw ­Theresa May see off her challengers and enter Number 10.

May swiftly created a new Department for Exiting the EU and placed it under the leadership of Brexiteer David Davis, while other prominent Leave supporters – Boris Johnson and Liam Fox – took the helm at the Foreign Office and Department for International Trade.

In terms of tangible cuts to the UK’s European ties, however, little has actually progressed since 24 June. May has boldly claimed that “Brexit means Brexit”, but it remains unclear whether that means hard Brexit, soft Brexit, or something in between.

That lack of clarity is likely to remain in the short term – at least until article 50 has been triggered – which is expected to happen early next year. We then face two years of negotiation and continued uncertainty about the terms of exit since Davis has said parliament will be kept in the dark about most of the detail.

Brexit uncertainty is unsettling for business and energy suppliers certainly showed their unwillingness to absorb Brexit risks when 12 firms pulled their fixed-term deals and replaced them with higher tariffs – ­citing the fall in sterling as the reason.

However, despite the scope for considerable long-term change, most utilities have resisted the urge for knee-jerk reactions.

As consultancy Baringa observes, “the energy industry is unlikely to radically alter in the near term”, with medium and longer term impacts relying on the single market negotiations and Britain’s access to the Internal Energy Market.

Other negotiations to extricate environmental and water policy will similarly be long term and drawn out impacts, to which companies can gradually adapt, rather than sudden shocks.

Some companies have expressed concern that asset investment will become pricier due to hiked costs for imported parts.

On the whole though, regulated ­utilities are hopeful that Brexit may make their slow and steady returns more attractive than ever to cautious investors and, after an ­unnerving delay on the decision to invest in

Hinkley Point C, government has reassured industry that Britain is still open for business – with some strings attached.

Investors in low-carbon infrastructure will also have been pleased by recent announcements from government about procedure for ratifying the Paris Agreement on climate change, paving the way for further low-carbon developments.

For water utilities, little is known about what the EU exit will mean for environmental regulations, which are currently set in Brussels. However, it’s unlikely that government will want to be seen as rowing back on environmental legislation and with Britain owning a strong legacy of leadership in water framework development, it’s unlikely there will be any major departures.

As utilities square up to the post-Brexit reality, question marks remain over policy and investment stability – challenges which may be exacerbated by the scope for major skills shortages as a result of constrained movement of labour. However, for the short term at least, utilities can emulate those prescient REM singers and say that, despite the end of the world as they knew it, they are feeling fine.

Read the five key pointsd utilities should consider post-Brexit here.