This special commentary from June 24, 2016, delves into the United Kingdom’s (U.K.) exit from the European Union (EU).

  • We expect two years of contentious separation agreement negotiations.
  • We don’t know whether London will stay Europe’s financial center or if other nations will line up to make their exit.
  • The future of euro-denominated instruments is uncertain.

On June 24, 2016 the people of the United Kingdom (Great Britain and Northern Ireland), unexpectedly voted to exit the European Union, a move referred to as “Brexit.” The close decision elicited a magnified market reaction, constituting a re-rating of global financial risks.

The vote to split up doesn’t mean there will be a clean, quick break. In fact, the Lisbon Treaty provides for a two-year period from the date that the U.K. government formally notifies the EU of its intention to withdraw, which is expected in the fall of 2016. Future arrangements would likely constitute bilateral agreements to replace European Commission directives that regulate affairs in the U.K. and Europe.

Please see important disclosures at the end of the commentary.

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