Public Affairs in Europe: a new, but no less challenging era

The following piece is written by Ben Petter, Managing Partner at Lomond Corporate Relations. It was first published on 20 June 2022 by the International Public Relations Association (IPRA) as one of its series of ‘thought leadership essays’.

A lot has been written over the last couple of years about the impact of covid-19 on Communications, and I think it’s true that, in all of the companies I have seen up close, the pandemic has enhanced its status within the organisation.

There has been less focus on the impact of the pandemic on the Public Affairs function within multinational companies (N.B. As I’m focusing on Europe, I am going to use the typical European definition of ‘Public Affairs’, meaning government affairs and policy-focused stakeholder relations). However, it’s been an incredibly challenging period for European Public Affairs teams too.

The primary difficulty, as normal within corporates, has been headcount. Almost no one can afford a Public Affairs specialist in every country, so even reasonably well-resourced organisations mostly opt for a geographical coverage model. That means, if you’re lucky, a few Public Affairs practitioners focused on their ‘home’ market (in the largest, highest-priority countries for the business), with the rest of the team covering clusters of countries (particularly in regions like Central & Eastern Europe, where I have been based for the last 12 years, which contain a large number of small markets).

Covid put serious strains on this model. There were three main problems:

1. A fractured continent: There was obviously no coordinated response to covid across Europe, and so in the EU alone, the pandemic was the equivalent of political crisis management in 27 countries simultaneously. Regional Public Affairs people are used to fire-fighting, but not on 27 fronts at the same time.

2. The world sped up: Policy-making is, in normal times, a slow-moving process – sometimes glacially slow. Not during the pandemic, it wasn’t. Decisions with major impacts on business operations were taken from one day to the next, often with next to no prior warning.

3. Governments took control: The pandemic has seen the most dramatic state intervention in our lives outside wartime. Governments pulled virtually every policy lever available to try to protect the public and the economy – and, while the picture varies from country to country and is contested everywhere, the economic damage could have been much worse.

It’s only one metric, but the unemployment rate across the EU was 6.5% on the eve of the pandemic. It peaked at 7.8% in the summer of 2020 and has been falling gradually ever since. It has now dropped below pre-pandemic levels.

Go back to March 2020, when nationwide lockdowns were being introduced for the first time in Europe. If you’d said to most people then that restrictions would still be in place two years later, the consensus would, I think, have been that covid would have wiped out whole sectors of the economy and led to record unemployment rates everywhere. That hasn’t happened, mostly because of government intervention.

It would be unwise to try to predict the future right now, but there are a few reasons to think that the war in Ukraine will continue all three of these trends, with the third – an enlarged role for the state – becoming a kind of ‘new normal’, for some time at least:

The ‘cost of living’ crisis is already forcing governments to intervene to protect consumers

Inflation was becoming a big issue across Europe even before the Russian invasion of Ukraine. Indeed, in the year leading up to the war, consumer energy prices increased by an average of more than 25%. They are, of course, climbing steeply now, and many European governments are already stepping in, including to control fuel prices, either through changes to VAT rates, tweaks to excise tax levels or even price caps.

It won’t just be energy, though. Rising food prices, for instance, are becoming a really acute problem in many countries, particularly in Central & Eastern Europe, and could be another area where government intervention is deemed to be necessary. Food prices aren’t as easy to regulate as fuel, but the European Commission did say last month that “Member States may implement reduced rates of VAT and encourage economic operators to contain retail prices” – which isn’t something you would have heard from Brussels pre-2020.

Doubling-down on the Green Deal agenda is good news, but it will require speed and significant investment

The European Commission’s ‘RepowerEU’ communication sets a course towards independence from Russian energy imports and is a doubling-down on the Green Deal agenda to accelerate the transition to climate neutrality. There isn’t a watertight consensus on this approach – there never will be – but broadly speaking, the political will is there to take the steps necessary to make this happen.

But doing so will require urgent, widespread policy intervention and major public spending commitments over a period of several years. There won’t be many industries that will be completely unaffected.

Public spending will need to increase in other areas too

Increased public spending won’t be restricted to the energy and environment sector. Defence budgets will increase across Europe as well in response to the threat from Russia. We should also expect some policies that were put on the back-burner during the pandemic to return to the top of the priority list as governments look to take control and shape a proactive agenda again.

During covid, no one questioned the need to increase the national debt to save lives and protect jobs. Governments will need to continue in that mode in the face of this new crisis, but that can’t last forever, and with the cost of living pressure on consumers, when tax increases do come, it will surely be the corporate sector that will bear the brunt of it.

What does all of this mean for Public Affairs leaders?

So I think it’s clear that the world we are living in now is no less challenging and complex for Public Affairs practitioners than the pandemic era.

It has even led to some in the industry questioning whether the geographical coverage model for Public Affairs might need to be re-evaluated (see this recent article, for example, from the always insightful and thought-provoking GR_blog).

However companies decide to structure the Public Affairs function, the fundamentals remain the same: How do you identify business critical threats and opportunities while there is still time to do something about them? How do you pick your battles so that the available resources are used in the most effective way? And how do you develop compelling advocacy campaigns that deliver measurable business impact?

The problem is that the current geopolitical, political and economic context is making all of those things harder and harder to achieve.