Perspectives

Brexit and the business of government

The state of the state

The Brexit vote of June 23 will throw new challenges at the public sector over the coming five years, adding to the major reforms and economic uncertainties which it already faces.

That is according to the latest Deloitte State of the State report, which looks at the potential impact of the referendum result, along with emerging technologies and changing citizen demands.

But despite the question marks hanging over the Brexit negotiations, we believe a business-as-usual approach, targeted digital transformation projects and stronger citizen engagement should all help the public sector to navigate the present uncertainty.

Brexit challenges and opportunities

Rather than focusing solely on deficit reduction, public sector agencies will increasingly need to think about the effects of Brexit on everything from their finances through to their internal structures.

With the Autumn Statement just around the corner, the Chancellor will have to decide whether to focus more on investment rather than austerity, as the economy adjusts to new realities. In Scotland, the prospect of a second independence vote is back on the cards, while the Welsh Government is raising questions over the substantial funding it currently receives from Europe. In Northern Ireland, meanwhile, the referendum result has fuelled talk of potential border controls.

Our report suggests that regional funding arrangements, the public finances, the tax and legal systems, transport and immigration are among the key areas which will be heavily affected by the forthcoming Brexit negotiations. Policing, higher education, workforce arrangements, regulations and Whitehall’s capacity could also come under scrutiny.

Yet despite the many unknowns surrounding the UK’s departure from the EU, we believe it could also provide the public sector with opportunities. As powers are repatriated from the EU back to the UK, public bodies will get the chance to rethink where responsibility for different duties should lie – and who should be tasked with making key decisions.

Managing talent and citizen demands

Of course, Brexit is not the only issue likely to cause disruption in the public sector. Talent management and the changing expectations of citizens are other key factors which will need to be addressed.

In terms of talent, robotic automation is something government departments will have to get to grips with in the coming years. Emerging technologies could cut the amount of time employees spend on repetitive tasks, while improving the routines of public-facing staff. The gradual rollout of automated processes could reduce the public sector workforce by 861,000 by 2030, potentially saving £17 billion in annual wages.

While adapting to automation, public sector departments will simultaneously need to be aware of shifting citizen demands. After polling more than 1,000 members of the public, our research suggests the NHS remains their top priority, while they are keen to see improved transport services, hospitals and investment. Although 41 per cent of people expect public services to get worse post-Brexit, 60 per cent want these services to be extended – even if it requires tax rises. Ultimately, people want agencies to collaborate more effectively, while the younger generation are willing to engage with them online.

Planning for the future

With so many challenges on the horizon, the good news is that public sector leaders appear well-aware of the need to make improvements.

After questioning more than 40 leading figures from across the sector, our study found that they feel continued transformation is needed in the NHS – and in relation to digital technology. Demand management, collaboration and effective leadership are other key issues which have attracted their attention, while they generally remain upbeat about Brexit despite the uncertainty it brings.

Based on their comments and the wider findings of our report, we can now offer five strategic recommendations to help the public sector evolve successfully and adapt to emerging challenges. We believe:

  1. A business-as-usual approach should be adopted during the Brexit process.
  2. Departments should use Brexit to rethink where responsibilities lie, with the repatriation of powers offering the chance to reform certain processes.
  3. Digital transformation projects should aim to reform organisations one step at a time.
  4. Efforts should be made to engage with the public, in order to manage their expectations.
  5. Public sector leaders should be valued and supported as they encounter new challenges.
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