Posted June 28, 2016 Jugraj Deol
An era of uncertainty had engulfed Europe following Britain’s biggest decision in more than a generation - to leave the EU.
With David Cameron announcing his resignation, sterling taking its biggest drop in the era of free-floating currencies whilst equities plummeting, the decision to leave the European Union reverberated across financial markets. But what happens now?
For the UK to leave the EU it has to invoke an agreement called Article 50 of the Lisbon Treaty – that will set in motion the formal legal process of Britain’s departure from the European Union. It allows a two-year window to negotiate terms of withdrawal. Britain will continue to abide by European laws and treaties but take no part in decision making as negotiations get under way.
No state has ever left the European union before and the guidelines for an exit –Article 50 of the Lisbon treaty - are brief. The consensus across Europe is for one of a swift departure with EU leadership demanding Britain to activate Article 50 “as soon as possible, however painful the process may be”.
"Any delay would unnecessarily prolong uncertainty. We have rules to deal with this in an orderly way. Article 50 of the Treaty on European Union sets out the procedure to be followed if a Member State decides to leave the European Union," the official statement from the European Commission said. "We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union."
By contrast the feelings amongst the Out Campaign is one of no need to trigger article 50 until informal negotiations talks have occurred. This is mirrored by business leaders; research from the Institute of Directors (IoD) showed more than half of its members prioritized getting a good deal over a swift exit, with only 32% giving an equal weighting to the speed of the process and maximizing terms of exit.
Untying the relationship with the EU is the easy part. Agreeing a new trading relationship, new tariffs and obligations of free movement will be far more difficult. An equilibrium must be reached with Britain striving for favorable terms whilst European Commission discouraging further members from following suit. This outcome will set the tone for Britain’s financial and economic recover.