What are the immediate general impacts of the UK leaving the EU?
- Financial Markets,
- Non UK passport holders
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Immediate consequences are mostly financial. However, The Prime Minister David Cameron has resigned. The opposition Labour leader Jeremy Corbyn faces a vote of no confidence. The UK's EU commissioner has resigned, saying "what is done cannot be undone". Scotland will have a new referendum on independence. And this will be far more likely to succeed than the failed 2014 attempt, given that 62% of Scots, and every single Scottish region, voted to stay. Contrasting 53% of English voting to leave.
Moody's will cut the UK's credit outlook to negative. S&P will downgrade the UK from AAA credit rating. The markets were not happy and reacted with immediate negativity; The pound fell against the dollar, at its lowest by 10%, the euro fell 3% against the dollar, shares in RBS, Lloyds, Barclays fell as much as 30%, FTSE fell 3%, even the oil price fell 4%.
Globally stock markets lost $2trl in value following the vote. Wall Street fell by 3%. German and French stock markets fell by 7%, Spanish and Italian markets lost a record 12%. Poland's zloty fell by 4%, whilst Japan's yen actually gained as much. Though Tokyo's Nikkei fell 8%. Copper fell by 1.7% and gold went by up 5%. All of this was unexpected, few people suspected this sort of a reaction would happen; which has made it all the worse.
When the UK leaves the EU (not for a while yet)...
One of the Leave campaign's most important promises was that they would be able to spend £350m a week more on the NHS. This figure however was the UK's gross EU contributions: not minus the UK's rebate, then minus EU grants, then minus EU non-government institution grants (like university research). Nonetheless, Nigel Farage almost immediately broke his word on the pledge which almost certainly helped win them the referendum. So the NHS won't be getting a windfall. The NHS in England and Scotland will be divided, and I imagine though Scotland will try and keep it a public institution, the fact the conservative government has disbanded it legally, and defeated an attempt to reverse that decision with underhanded tactics, will probably mean that in England privatisation will be the long term trend. Do you have medical insurance, England?
Westminster however completely and utterly failed to get anywhere near their 2010 election pledge to reduce net immigration from "hundreds to tens of thousands". It's at an all-time high, and though the argument goes that leaving the EU allows the government to clamp down on migration: it didn't seem to try very hard, or be able to do much, about immigration from outside of the UK. In theory they may be able to reduce the numbers or enforce harsh deportations, but in reality probably not.
One specific point about the economy I will raise is that the City of London has enjoyed a unique position, as a financial bridge between the world and the EU. Now that bridge has been burned, and the EU's financial hub will likely move to Frankfurt. London's finance industry will suffer as they have to wait for trade agreements to be renegotiated, and lose business opportunities to those able to capitalise on the crisis. And since Britain is disproportionately overreliant on the financial sector, this will cause problems for London and the nation.
Also, as a curious note; leaving the EU may destabilise the peace in Northern Ireland, as both generous EU grants to the province are cut, and the EU law tied into the Good Friday agreement is done away with, it theoretically means the UK may have to renegotiate peace with Ireland and the PIRA. At the very least, the possibility of Irish reunification now opened (as with Scottish independence) will very likely pour fuel on the embers of terrorism.
Define "immediate". Nothing changes until the UK actually leaves the EU. That won't happen until a declaration is made under Article 50 of the Lisbon treaty, and an agreement is made spelling out the details. Or two years elapse from the declaration.
Meanwhile it looks like nobody wants to be the person responsible for actually pressing the button that irrevocably destroys the UK's position in the EU, so this won't happen for a while and may never happen if we have a snap election won on a Remain manifesto.
Can't answer to all these, but here's what has been going on in the finance markets.
British bank stocks have fallen ~30 percent, and the British pound is down 8 percent against the dollar. Currency drops of 8 percent just don't happen under ordinary circumstances. Britain will have to renegotiate a lot of trade deals, and they will correspondingly lose a good deal of influence. Other European markets will become stronger at their expense, but both will become weaker relative to their American/Asian counterparts.
The effects on the US will probably be less grim though - recently, we have been fairly insulated from overseas economic problems.
Legal matters: Nothing until October at the earliest. This is something that has to be done by the Prime Minister himself. Cameron has declined to do so and said that it'll have to be his successor who does it.
Financial matters: Wait and see. This is a live and happening event. The Bank of England will try to prop up the economy as best they can. The markets are based a lot on confidence, if the world continues to have confidence in the UK economy then it'll hold together. If they decide that they no longer have confidence then it'll all collapse.
House prices: This is the one thing that both side agreed on, they both said prices will fall, this is however tied to the financial side of things. Will London houses remain a safe haven for your money? Again it's about confidence as the housing market is in a massive bubble.
Direct impact: loss of value for UK currency and markets.
Long running impact: not that much, most of the things they 'have' to do, they will still 'have' to do to work with the rest of the world.
More detailed impact: as already posted, we won't know until at least 2 years of whining by old men with no real current experience being a non-high-level-politician decide what "the people" are going to get.
Effects so Far
We've already seen some very significant effects in the form of sharp drops in the value of the Pound and Euro and stock markets all over the world. This isn't immediately catastrophic in itself but if the trend continues it will put pressure on UK and Eurozone economies which are already fragile.
It will be a while before anything changes legally but the most immediate effects will be the result of speculation and uncertainty, especially in the financial markets. For sure, until there is a clearer picture of what the UK's relationship with the EU will look like inward and internal investment in both economies will drop off and international companies, especially in manufacturing and finance, with interests in the UK will be at least looking at moving them out.
The key issue here is that uncertainty about the UK's future trade relationship with the EU is a fact but any potential benefits of leaving the EU won't materialise for some time.
Medium Term : leading up to formal exit
In the medium term there will be continued uncertainty around what the terms of the UK exit will be, especially in terms of trade arrangements with the EU. We are now also in the situation where the Prime Minister has announced that he will step down before the end of the year so the next PM will be determined by the Conservative Party leadership election process. Although the UK doesn't formally elect the PM a leader appointed mid-term is often seen as having less of a democratic mandate and as the current government doesn't have a large majority there is a good chance of an early general election, especially as the incumbent government will be responsible for negotiating and managing the UK's exit.
It is also possible that a government elected on a promises of staying in the EU could halt the whole process, especially if an election is called before article 50 is invoked. It is also notable that none of the major players involved in UK politics has expressed any urgency about invoking article 50.
In the meantime it looks like the right of the conservative party will become more prominent in government. On the other hand Jeremy Corbyn, the labour leader has been criticised by is own party for lukewarm support for the Remain campaign and is already deeply unpopular with Labour MPs but has massive support from party members.
The Liberal Democrats were all but wiped out in the last election but they have always been consistently pro-Europe so it is possible that they could attract support from pro-European supporters of the other main parties.
UKIP and now a bit of an unknown quantity. Nigel Farage almost immediately backtracked on his promise of more NHS spending which is unlikely to go down well with voters and now that they have achieved their primary aim it is hard to guess where they will go from here.
Longer Term : future relationship with Europe and UK politics
The Leave camp now have a bit of a problem in that most of the short term consequences will be negative and it will take at least 2 years before any of the things they promised can possibly happen and if the economy takes a serious turn for the worst there could well be a backlash against them.
Much depends on what sort of exit deal is negotiated and how long it takes. This is complicated by the fact that initial noises from EU leaders have not been very positive and so far the EU has taken a big economic hit at a time when it was already struggling so they may not be inclined to do the UK any favours and won't want to encourage any other members to leave by making exit too easy or attractive. On balance the EU will probably resist the temptation to 'punish' the UK economically for leaving but at the same time won't be inclined to be generous.
It is in everybody's interests to maintain some sort of free trade agreement between Britain and the EU but the sticking point will be free movement of people as the EU sees this as being inseparable from free trade but reducing immigration was a key pillar of the leave campaign. It is reasonably likely that the final balance between migration and trade will be some face-saving re-branding of the status quo. Probably based on the concept that the UK could change border controls unilaterally if it wanted to but with the tacit understanding that it won't.
The direct legislative influence of the EU will almost certainly be dropped although it is likely that at majority of existing EU originating laws will stay on the statute books en-masse with specific laws being repealed as and when they arise. Simple practicality dictates that a lot of nuts and bolts regulations relating to trade such as product standards will have to remain and will likely be shadowed in future by the UK. This is for the simple reason that any goods sold in the EU whether produced in the UK, China or wherever need to be CE marked and there is no reason for the UK to adopt a parallel, alternative standard.
There is also the very real possibility of a fairly serious shakeup of the political landscape in the UK. Scotland is talking very seriously about a second independence referendum which would now be almost certain to succeed (although not certain to happen) and leaving the EU is also going to cause a lot of tension in Northern Ireland as it gets a lot of EU funding and the argument for uniting with the Republic of Ireland now has EU membership attached to it.
It's also not beyond the realms of possibility that there will be a shakeup of the main political parties, if the Conservative leadership moves to the right and Corbyn hangs on as Labour leader it is not impossible that there could be a mass exodus to a more centrist position from both parties, perhaps through a reinvention of the Liberal party, either via the Liberal Democrats in their current form or an entirely new entity. Especially bearing mind the electoral success of several new parties in Europe.