On June 24, the world woke up to the rather shocking news that the UK had voted to leave the European Union.
Brexit: Britain Votes To Leave the European Union. What Next?
While the UK is still a member of the EU and will continue to be for several years, the leave vote has and will trigger a number of dramatic developments.
Cameron steps down
The Prime Minister for Britain, David Cameroon has announced that he would resign following the Brexit vote. His resignation will come before October when the requirements of the EU’s Article 50 will be put in place.
He said, “I will do everything I can as a Prime Minister to steady the ship in coming months, but I do not think it would be right for me to captain that ship.”
He added, “There is no need for a precise timetable today, but we should aim to have a new Prime Minister in place by the start of Conservation Conference in October.”
According to the party’s rules, Conservative members of parliament (MP) will hold several ballots to nominate two popular candidates, who will then go into a run off to elect Britain’s next Prime Minister.
Leaders in greater Europe react
The Union’s Article 50 was put in place as a guide in case any member state decided to leave the European Union. It takes around two years for the nation to separate from the Union. During this time, Britain will still be governed by the Union’s laws and will continue to be in business with the union. The other member states will determine the conditions for exit and presented to Britain, which will decide whether to “take it or leave it”.
The Prime Minister is responsible for starting the process. Either he can write a letter to the president of the union or he can verbally request for the exit.
The French prime minister said, “There is a need for urgency ... so that we don’t have a period of uncertainty with financial consequences, political consequences.”
On its part, Britain is not in a hurry and wants to think through the decision. However, if the process takes a long time, the world economy may also suffer.
Already, plans are underway to start the exit process. On Saturday, foreign ministers from Germany, Netherlands, France, Belgium, Italy and Luxembourg met in Berlin. On Monday, leaders from Germany, France and Italy will meet ahead of a wider EU summit later next week to be held in Brussels to discuss the exit plan and the result of the Brexit vote.
Long negotiations ahead
What will happen following this leave vote is hard to predict. Negotiations will likely take years. Meanwhile, EU leaders are worried about a possible domino effect with anti-EU parties in the Netherlands and France demanding referendums on EU membership.
It has been predicted that the remaining 27 member states will make the laws for exit so tough to discourage any other nation from leaving.
Every nation in the union has a six months rotating presidency opportunity. Unfortunately, Britain’s turn was to be in 2017, which it has to forgo after the vote. On July 1, Slovakia will begin its period in the presidency. That means that it will be responsible for leading negotiations towards Brexit.
Donald Tusk, the European Council President, has appealed to the 27 EU members to remain calm, saying that this should not be a moment for hysterical reactions.
German Chancellor, Angela Merkel has also expressed regret over the leave vote.
Scotland looking to leave the UK
Brexit will also affect Scotland as it voted in 2014 to be part of the UK. Their union is however possible only if the UK remains in the EU. For that reason, the Scottish leader Nicola Sturgeon, met with her cabinet on Saturday.
She said in a statement after the meeting, “We will explore possible options to protect Scotland’s place in the EU.” Scotland has been united to England for 300 years. Most people from Scotland did not want the exit but unfortunately, the Britons had more votes.
The world economy reacts
Speaking about the potential effects of the exit vote, a senior fellow at Bruegel said that the vote was “essentially against economic rationality and driven by identity concerns and unease about globalization and trade.”
The FTSE 100 fell 8% in London following the announcement that the Leave Vote had won. Bank shares and house builders experienced a large sell-off of shares, with RBS and Barclays at one point plunging by more than 30%.
The value of the pound has also fallen to its lowest since 1985, hitting $1.3305 at one point, a fall of over 10%.
According to Mark Carney, the Bank of England governor, who will likely be a key figure in the exit negotiations, some economic and market volatility could be anticipated following the Brexit vote but that the Bank was ready for any eventualities.
So far, business leaders are calling for calm and clarity over the exit process. At the same time, several firms have pointed out that they will review their investments in the UK. Morgan Stanley has revealed that it could start a process that could see up to 2,000of its bank staff based in London relocated to Frankfurt or Dublin.
Mr. Carney pointed that the Bank was prepared to provide the necessary assistance for financial stability including injecting extra liquidity worth $250bn to support the sterling and the banking system.
While analysts commended this intervention, it is yet to be seen how the markets will react come next week.