The outcome of the referendum on United Kingdom membership of the European Union (EU) was a vote of 52% to 48% for the UK to leave the EU. The result is a massive rebuff to UK Prime Minister David Cameron – who has today announced his intention to resign in a few months to make way for a new Prime Minister – and has caused shock and surprise across Europe and internationally.

It is important to note, however, that nothing changes with immediate effect. The result of the referendum is advisory on the UK Government: it has no formal legal status. Of course the UK must now find a way to respect the outcome, but it is likely to be a lengthy process lasting more than two years.

In the meantime, the UK remains a full Member State of the EU, all EU rules and regulations continue to apply, including the fundamental rules concerning freedom of movement of people, goods and capital within the European Union and EU Single Market.

All eyes on London

Withdrawal negotiations between Britain and the EU will only begin once the UK prime minister notifies the President of the European Council that the UK intends to withdraw – as stipulated in Article 50 of the Treaty on European Union, which stipulates the process for a Member State to leave the EU.

Under the Article 50 process, EU Treaties would cease to apply to the UK from the date of entry into force of the UK’s withdrawal agreement, or two years after the UK’s notification of its intention to withdraw (a two-year period which can only be extended by unanimous agreement of Council). The withdrawal agreement itself must be approved by a qualified majority of Member States, and receive the consent of the European Parliament.

As triggering Article 50 will start a two-year clock on Britain’s negotiations with the EU, the UK government is unlikely to want to notify the European Council of its intention to withdraw until it feels ready to negotiate – and previous suggestions by David Cameron during the referendum campaign that the process would have to be initiated immediately are unlikely to be carried out.

Much more likely is that withdrawal negotiations will be initiated only once a successor to David Cameron has been appointed. Announcing that he intended to resign at a Downing Street press conference this morning, Cameron said that there should be a new leader in place by the Conservative Party Conference in October.

Cameron’s successor will be appointed in a two-stage process over the coming months: first, a ballot of all UK Conservative Party Members of Parliament; then for the leading two candidates to go to a ballot of all Conservative Party members in the UK at large, with the result announced in late September or the first week of October. Leading contenders include Boris Johnson, the former Mayor of London and prominent Brexit campaigner, Justice Secretary Michael Gove, and Theresa May, the Home Secretary – although it is likely that other candidates will emerge as well.

It is also possible that the new Prime Minister will want to call a UK general election in order to secure a personal mandate, before formally initiating withdrawal negotiations.

Even if the new Prime Minister does not call an election, a new Government and Cabinet will need to be formed, and discuss and agree the UK’s objectives and strategy for negotiating with the EU.

All this is likely to delay a decision to activate Article 50. As a result, despite demands from some in both the UK and EU to accelerate the process, it may well not be until the first half of 2017 that the new Prime Minister notifies the European Council of Britain’s intention to withdraw.

Overall, the process is therefore unlikely to be concluded much before the first half of 2019 at the earliest – and quite possibly much later. There is much that could happen, with many variables, during that period.

The EU response

The EU will need to wait for these British political processes to be completed, but they will not wait passively. Already at the European Council on 28/29 June, leaders of the remaining 27 Member States (EU27) will meet informally to discuss their response to the UK referendum.

These discussions are likely to continue at bilateral level during the months that follow. EU27 leaders will need to decide:

  • What the objectives of Article 50 negotiations should be: simply to formalise the arrangements for the UK to leave the EU without putting in place an alternative trade arrangement, or to also enter into negotiations about the future relationship between the UK and the EU;
  • What its response will be to the potential requests of the UK – e.g. continued access to the single market (a ‘Norway style’ arrangement), or an EU-UK Free Trade Agreement (FTA).

If the EU27 were unwilling, in the context of Article 50 negotiations, to agree to either a Norway style arrangement or an FTA, EU-UK trade relations would need to fall back on WTO Agreements (which imply both sides introducing tariffs against each other). Even here, however, the WTO has made clear that there will need to be negotiations over Britain’s specific commitments.

More generally, there are likely to be two main strands of opinion among Member States. Some states are likely to want to preserve a continued close relationship between the UK and the EU, and to avoid jeopardising important economic interests. That might argue for a Norway-style arrangement, whereby the UK would continue to have access to the EU Single Market, but continue also to pay into the EU Budget and to accept freedom of movement of EU citizens to the UK. However, it is far from clear whether such an arrangement would be acceptable to the new UK government, or to public opinion in Britain.

Other Member States are likely to take a tougher view: that it is important to make an example of the UK in order to weaken populist movements in their own countries which might otherwise push for similar referenda or fundamental changes to EU rules and policies. Such views are likely to be particularly strong in France and possibly Italy. Across the EU, there will also be an awareness that a favourable deal for the UK might encourage opinion within other Member States to follow the British example.