Brexit negotiations

Introduction

2018 will be remembered for the Brexit negotiations. Like many voters and as a procurement professional, I’ve been bewildered by the negotiation strategy that has unfolded since Brexit began almost 2 years ago.

Voters have become familiar with a variety of soundbites like “Brexit means Brexit” and “nothing is agreed until everything is agreed”. Initially this served the perceived political need for all parties, both right and left, to believe that they were going to get the Brexit they wanted, whether that was a hard or soft Brexit. The Chequers Plan shattered any of these illusions by providing no one with what they wanted.

The purpose of the Chequers Plan was to provide Theresa May, the Prime Minister, with a list of requirements. One of the most popular forms of negotiation preparation involves using a Seven Elements approach, as first outlined in “Getting to Yes: Negotiating Agreement Without Giving In” by Roger Fisher, William Ury, and Bruce Patton. The Seven Elements include interests, options, legitimacy, alternatives, communication, relationship, and commitment. It is not clear if these elements were considered at any time before or during the negotiations. As a result, May appears to have been unprepared and poorly informed which has resulted in a deal that is unlikely to be passed by parliament.

Before embarking on a negotiation, procurement professionals would create a strategic sourcing strategy which would include an analysis of the key drivers and the negotiation approach. In the case of the Brexit negotiations, the important drivers are economics, requirements and communications.

1. Economics

As with any debate of this nature, statistics have been used by both parties to justify their opinions. Unfortunately, there are many examples of the misuse of statistics, for example, the claim on the Leave campaign’s bus stating “We send the EU £350 million a week”. This compounded the uncertainty that many already felt.

I could quote the relative value of exports and imports, the criticality of services like banking and funding for EU wide initiatives like scientific research but, in terms of the negotiation, these all pale into insignificance when we consider that UK economy is a sixth of the size of EU.

This single statistics shows us the impact of Brexit on the EU will be much lower than UK which means that EU has considerably more bargaining power. Philip Hammond, the Chancellor of the Exchequer said that “looking purely at the economics, remaining in the single market would give us an economic advantage”. From a finance perspective, I would say that the business case for Brexit does not add up and the project should be abandoned.

2. Requirements

Several different surveys have shown that the two main reasons people voted Leave was sovereignty and immigration.

If UK consumers want to eat fresh tomatoes all year round, drive affordable cars and go abroad on holiday, they will have to adopt some international standards.

Furthermore, various interest groups from farmers to hotels to the NHS have asked for exemptions to the proposed immigration rules.

Given these pressures, it is difficult to see how UK parliament will have more scope to set unique laws in areas voters consider to be in the national interest.

From a business perspective, voters have been allowed to develop unrealistic expectations. This should have been identified at the start of the project and addressed through the communications strategy.

3. Communications

Inventing Euro myths has been something of a sport for the British press for nearly 30 years. From custard creams to condoms, EU has been blamed for meddling in almost every aspect of British lives. Without tackling the negativity bias [1] towards the EU, any Brexit agreement would be seen as a poor deal for Britain. Like sovereignty and immigration, this should have been addressed through the communications strategy.

Negotiation format

The Brexit negotiations have always been presented as positional bargaining [2] where UK and EU have been at opposite ends of the spectrum. By starting with an extreme initial position, the parties are forced to make concessions to reach agreement. The negotiation often grows hostile, and communications involve threats and lack transparency. The outcome is either one party winning or the negotiations stalling. All these characteristics are true of the Brexit negotiations.

If principled negotiation [3] had been adopted instead then a greater level of understanding and even trust could have been created delivering a better outcome for both parties. Given the economic situation, EU may have rejected principled negotiation in the clear knowledge that they had the most bargaining power.

Negotiation tactics

In keeping with the positional bargaining, May adopted a competing style of negotiation. This works well where fast negotiations are required and there aren’t many variables. Unfortunately, neither of these factors is true for Brexit. In the end, many will view May’s style as accommodative which led to her to be submissive and concede more than was necessary.

A collaborating style would have been more successful as both parties’ needs are met. Parties brainstorm on how to create mutual value and think outside of the box on collaborating on a solution. Again, EU may have rejected this approach.

Conclusion

UK faces an unprecedented situation in which it is impossible to accurately predict the final outcome. Given May’s tendency to procrastinate, an extension to the deadline looks likely to avoid a No Deal Brexit. Hopefully, lessons have been learned and the extra time will not be wasted.

[1] Negativity bias, also known as the negativity effect, is the notion that, even when of equal intensity, things of a more negative nature (e.g. unpleasant thoughts, emotions, or social interactions; harmful/traumatic events) have a greater effect on one’s psychological state and processes than neutral or positive things. Danny Kahneman (an economist who won the 2002 Nobel prize for his work) asked participants in a study to imagine either losing $50 or gaining $50.  Even though the amount is the same, the magnitude of the emotional response is significantly larger for those imagining what it would be like to lose the money.  In other words, the negativity of losing something is far greater than the goodness of gaining something, even when the “something” that has been lost or gained is objectively equivalent.”

[2] Positional bargaining, also known as distributive negotiation, involves arguing based on a position. Each side takes an extreme position based on its wants, needs, and limitations. These positions are almost always on opposite ends of the spectrum. The parties then treat the negotiation as a zero-sum game in which only one party can “win” the negotiation.

[3] Principled negotiation, also known as integrative negotiation, is a negotiation format in which parties work together to forge a value-creating agreement that leaves both parties happy with the outcome and with the status of the relationship. Principled negotiation creates a collaborative environment in which parties establish shared interests and work together to build mutually beneficial solutions. The parties treat the negotiation as a win-win game where both stand to gain from the outcome.

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