If Britain wakes up on Friday and finds itself voted out of the European Union, the actual process of extricating itself will take nearly two years, but the most immediate impact will be visible on the economy.
Given London’s pre-eminent global position in the world of finance, the pound will most certainly take a hit, with ripples across other financial capitals across the world. Similar will be the story on stock exchanges.
Inflation is likely to rise, including a rise in the Bank of England’s interest rate. Chancellor George Osborne has already mentioned the possibility of presenting an emergency budget that will include further cuts in public spending.
But apart from the impact on finance and markets, no one is quite sure of what the future holds for a Britain outside the EU. Britain’s tariff-free access to the 500 million-strong European Single Market will be severed, hitting 45% of its exports.
Until the process of withdrawal is complete, Britain will continue to be a EU member state. Experts are unclear about the immigration status of EU migrants after Brexit, including those already in the country, and also of millions of Britons living in EU countries.
Article 50 of the EU’s Lisbon treaty provides an exit mechanism, under which any EU member state “may decide to withdraw from the union in accordance with its own constitutional requirements”. A state that decides to withdraw “must notify the European Council of its intention”.
Thus, withdrawal will not begin until a formal notification is lodged in Brussels by Britain. The European council includes all 28 EU heads of state or government together with the council’s president, Donald Tusk, and the president of the European Commission, Jean-Claude Juncker.
Article 50 says the leaving state ceases to be an EU member two years after a notification, unless an extension of negotiations has been agreed unanimously by the European council and by the leaving state, or the withdrawal agreement sets an earlier or later date.
Both Remain and Leave sides agree the referendum is a once-in-a-generation one, and any outcome will be implemented. Juncker said on Wednesday Britain will not be able to return to the negotiating table if it votes to leave the European Union: “Out is out.”