Following the referendum on whether the UK should remain in the EU, 52% of the voters voted to leave the EU. The total leave vote was 17.410.742 million against 16.141.241 remain. The turnout for the referendum was 72.2% of the electorate. The immediate economic aftermaths of the vote was predictable. It had been aired in press and by economists for months. The vote meant a period of economic uncertainty, as it was not clear what new arrangements would replace current UK EU membership. There would be a period of negotiation on new treaty arrangement. In theory, the UK should formally exit by servicing notice under Article 50 of the Lisbon Treaty. In practice, this is unlikely to happen soon. The current arrangements will remain place. This is because the current Government will elect a new prime minister in September after David Cameron gave his resignation notice. Who becomes the new prime minister will determine the negotiating position of the UK. At present, the UK does not have a negotiating position. The two candidates standing for election are Theresa May and Andrea Leadsom If Theresa May succeeds in being elected the UK may end up remaining in the single market with some compromise agreement on free movement of people. A similar position to Norway. This will be lite Brexit. If Leadsom is elected, it is likely that the UK may leave the single market and try to negotiate a Canadian EU treaty arrangement. This is hard Brexit. However, the window for treaty renegotiation is 2 years after notice is given under Article 50. The Canadian EU treaty took 7 years. It is unlikely that the UK will be able completed these negotiations in 2 years unless it accepts the single market and the EU accept compromise on free movement.

As can be seen above, the uncertainty as to who will lead the Government has contributed to the economic uncertainty. Business dislikes uncertainty because it is difficult to make future investment decisions. This may push big business to relocate to EU countries particularly those businesses that rely on EU funding. There is also concern in the UK financial sector on the banking single passport. The effect of Brexit has plunged both sterling and shares to a 31 year low. Banks and property investment companies were hit particularly hard. In addition, the UK lost its AAA credit rating. These events could be described as an economic slowdown bordering on recession. Although the ordinary citizen may not feel the immediate effect of this, eventually it may reduce employment levels as consumers decide not to spend due to job uncertainty. It will also increase the cost of living, as goods from Europe will cost more. Once the new treaty arrangements between the UK and EU are in place business confidence may return but recovery may take years.

The other issue is contagion. If property values fall in the UK placing the loan books of the banks under stress, this may spread to other European countries who have weak banks such as Italy. Political contagion may also spread with populist parties of Germany, France, Hungry and Austrian pushing for similar EU referendums.

However, there may be light at the end of the tunnel. As the full extent of the economic implications sink in both with the politicians and the public, the new UK Government may consider the economic risks too serious and that the national interest requires the UK to remain within a reformed EU. This would probably mean a UK general election where the issue would be "you voted Brexit but we cannot deliver it how about Brexit lite!"

Domenic Pini (Pini Franco LLP)