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Brexit: what happens next?

The coming days will be filled with uncertainty as financial markets and politicians react to the UK’s vote to leave the EU. The actual process of leaving will take a long time, and the details will take hard negotiation. Here’s what we do know about the process.

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In the next few days, there will be a huge political reaction to the decision. Statements from British Prime Minister David Cameron, EU leaders, finance ministers, and central bankers are expected. There will be continued turmoil in the financial markets, and Bank of England Governor Mark Carney along with his peers across major economies are likely to be key figures in trying to soften the blow.

Just how the rest of the EU reacts could be critical to how things move forward. If things turn nasty, the exit and new trade deal negotiations are going to be far harder. It’s no easy task for the EU leaders either, many of whom are facing growing challenges from populist parties calling for their own countries to hold referendums.

Cameron has previously said he’d start the 'Leave' process by activating Article 50 of the 2009 Lisbon Treaty without undue delay. However, this is just the start of the process. The exit has to be negotiated with the rest of the EU, a process that’s supposed to be completed within two years. Activating Article 50 could also be delayed while initial talks on a new deal take place, according to senior 'Leave' campaigners.

If all goes to timetable, then Britain’s exit from the EU would take place in the summer of 2018. But it’s not that simple. The UK may not have negotiated a new relationship in full by then. That could take years longer. The 'Leave' campaign has said it wants to complete talks on a new trade deal between the UK and EU by 2020.

More will become clear in coming days and weeks, but for now it’s clear that the UK is taking a step into the unknown with years of hard negotiation ahead of it. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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