The UK’s decision to leave the EU significantly increases the risk of a constitutional crisis. The Scottish National Party is likely to seek another independence vote during the UK government’s post-2020 mandate, significantly raising the risk that the UK will break up. Today’s result is also likely to create serious regulatory and political difficulties for Northern Ireland, including on current arrangements with the Republic of Ireland, and EU funds supporting the peace process in the region, according to By Jan Gerhard, UK Analyst, IHS Country Risk.
Prime Minister Cameron’s decision to step down by October 2016 is likely to see a strong challenge by Leave campaign leaders for the party leadership. But, intra-party division over Europe has deepened long-standing fault lines, and it will be a major challenge to reconsolidate the governing Conservative Party, meaning that there is likely to be strong support for a compromise candidate. Those factors will further complicate the very substantial and complex legislation which will have to be dealt with by Parliament as a result of the leave vote, likely lasting many years. However, the Fixed-term Parliaments Act 2011 makes the dissolution of Parliament and calling of early elections possible only with two-thirds backing of Parliament or a successful no confidence vote, and neither the Conservative Party nor main opposition Labour Party looks likely to seek an election before that currently scheduled for 2020.
Acrimony in EU-level negotiations among member states is likely to abate as officials rally to EU solidarity in the face of a resurgent popular challenge across member states from nationalist parties. A rally to solidarity across EU member states is likely to accelerate the passage of some legislation. But the political centre within member states will continue to shift towards nationalist parties as they galvanise on the exit of the EU’s second largest economy. Meanwhile, medium-term operational uncertainty stems mainly from the legal status of the UK’s bilateral and multilateral trade agreements that assume the UK is an EU member-state.