BY Richard Summerfield
The British people have spoken and in a historic vote have chosen to leave the European Union after 43 years. The decision to leave was secured by a vote of 52 percent to 48.
A result that until fairly recently was considered unthinkable has been handed down this morning and, as result, global financial markets and stocks were plunged into a drastic and inevitable downward spiral. As a result of the ‘leave’ campaign’s victory, the pound fell 10 percent against the dollar, dropping to levels last seen in 1985; European shares too dropped more than 8 percent. Furthermore, billions of dollars were wiped off the market value of several of Europe’s biggest banks.
The UK’s decision to exit the European Union is a lurch into the unknown not only for Britain but for the wider European and global economies. Though there are many throughout Europe who have taken issue with the direction and policies of the 28 nation bloc, no country has ever taken the nuclear option and opted to leave.
Though the vote is hugely momentous for the UK, the result will also be significant for the future of the EU itself. Should the UK secure favourable exit terms from the bloc once Article 50 of the Lisbon treaty has been invoked, further disintegration of the bloc could occur. With France in particular becoming increasingly hostile to the EU, there will be interesting spectators on the other side of the English Channel watching the negotiations. With Brexit secured, ‘Frexit’ could be next on the agenda. As such, given the uncertain nature of Europe’s political and economic status, how the remaining 27 members of the union handle the UK’s exit could have huge ramifications for worldwide economic stability.
For the UK’s economic development, there are further issues which will be raised over the coming months and years. London’s status as Europe’s preeminent financial centre will be called into question moving forward, as will the potential of a return to recession for both the UK and Europe. The possibility of an emergency Brexit budget has been mooted by the chancellor of the exchequer, George Osborne, though this may seem unlikely given his ‘Remain’ loyalties.
While the future of the country is uncertain, one thing we know for sure is that prime minister David Cameron will not be the man to lead the way. By the time of the Conservative party conference in October, the UK will have a new leader as Mr Cameron chose to announce his resignation on Friday morning as the world was still digesting the result of the referendum. The future of the chancellor, a man who many considered a natural successor, may also be tied to that of his prime minister; Mr Osborne may now find himself on the outskirts of the political agenda, with chief Brexiteer Boris Johnson the frontrunner to replace Mr Cameron.
No matter who leads the country, the timing of the invocation of Article 50 will be crucial. Its activation will start the two year countdown toward Brexit, during which time the manner of the UK’s exit will have to be decided, as will the nature of the country’s future relationship with the EU.
Given the shaky ground on which the global economy sits, the decision of the British people to turn away from Europe will likely be damaging. The country’s access to the EU's trade barrier-free single market will likely disappear or be hugely curtailed.
For both Britain and the global economy, all bets are off.