In a surprise development that the markets had seemingly already priced out as only 15% probable, the British people have narrowly voted by 52% to 48% to leave the European Union.
Prime Minister David Cameron made a statement that the will of the people must be respected – the vote is not legally binding, but merely advisory – and a British exit must now be negotiated with the European Union. He went on to say that as a prominent Remain campaigner, he felt he is not the person to lead the withdrawal, so will resign as Prime Minister by October, by which time the ruling Conservative Party will choose a new leader.
As the results began to show a Leave victory was likely between about 3am and 4am local time, markets began to move heavily, with the GBP/USD pair hitting a 30+ year low of 1.32, and the EUR/USD pair also falling to 1.09. However, it is significant that as London has opened for business, the GBP/USD has rebounded to above a level it was trading at last February. The EUR/USD has also recovered greatly. Although the S&P 500 Index is down by more than 3%, the upshot of it all is that the financial cataclysm a Leave vote was supposed to unleash seems so far to have largely not materialized. However, it is possible markets may take a turn for the worse later today, especially when New York comes online. 
It is expected that the negotiations over the exit – no member has ever exited the European Union before – will take at least two years to conclude. 44% of Britain’s exports are to E.U. member states, so the level of economic integration that must be accounted for is quite high.
The vote throws up a number of difficult political issues for the United Kingdom, one of which may have global consequences.
The Leave vote was secured by English voters outside London, with several other cities also voting Remain as London did. England as a whole voted Leave, while Scotland and Northern Ireland voted quite heavily to Remain. The Scottish Nationalist Party, which fairly narrowly lost a recent referendum on Scottish independence, is now clearly going to demand that the Scots have a chance to vote again. If such a chance is not forthcoming, they may simply declare independence, although it would seem they would have to apply for membership of the E.U. as a new state, a process that could take a while, although it is quite probable the E.U. would try to expedite it.
Scottish independence and rule by the SNP could jeapordize Britain’s nuclear weapons, which must be run from suitable submarine bases which exist only in Scotland. The SNP have stated that in the event of Scottish independence, they will not make these bases available to the rump of the U.K.’s submarine fleet.
A potentially more sinister issue will now arise in Northern Ireland. Southern Ireland is a member of the E.U. and the Nationalist Sinn Fein party, whose armed wing the I.R.A. fought a long and bloody guerilla war against the inclusion of Northern Ireland within the United Kingdom, has already issued a statement demanding a referendum on “the removal of the Irish border”, i.e. the unification of Ireland. Although a peace process was concluded some years ago, the threat of a resumption of violence to press the issue should perhaps be taken seriously.
It seems that this vote is likely to present the following outcomes:
*The removal of one of the E.U.’s largest and most prosperous members in the U.K., a net contributor into the Union’s finances.
*Scottish independence which may jeapordize the U.K.’s permanent membership of the U.N. Security Council.
*The reactivation of the Irish Question.
*A more right-wing polity in the remainder of the United Kingdom, and a governing Conservative party that becomes more dominated by its right-wing elements.
Regarding financial markets, there will be some large movements, but meltdown may be avoided. Over the coming days, the shine will probably be off risk assets such as stocks, while risk-on assets such as Gold and the Japanese Yen are likely to increase in value.
Interestingly, while the opinion polls got the result largely right, the financial betting industry was offering payouts of something like 6 to 1 on a Leave victory just before the polls closed yesterday. There has been a great deal of speculation that the odds were skewed by a relatively small number of very large bets being placed on Remain.