After the British EU membership referendum held on 23 June 2016, in which a majority voted to leave the European Union, the United Kingdom experienced political and economic upsets, with spillover effects across the rest of the European Union and the wider world. Prime Minister David Cameron, who had campaigned for Remain, announced his resignation on 24 June, triggering a Conservative leadership election, won by Home Secretary Theresa May. Following Leader of the Opposition Jeremy Corbyn's loss of a motion of no confidence among the Parliamentary Labour Party, he also faced a leadership challenge, which he won. Nigel Farage stepped down from leadership of the pro-Leave party UKIP in July. After the elected party leader resigned, Farage then became the party's interim leader on 5 October until Paul Nuttall was elected leader on 28 November.
Voting patterns in the referendum varied between areas: Gibraltar, Greater London, many other cities, Scotland and Northern Ireland had majorities for Remain; the remainder of England and Wales and most unionist parts of Northern Ireland showed Leave majorities. This fuelled concern among Scottish and Irish nationalists: the First Minister of Scotland, Nicola Sturgeon, threatened to withhold legislative consent for any withdrawal legislation and had formally requested permission to hold a Second Scottish Independence referendum, while the Deputy First Minister of Northern Ireland called for a referendum on a United Ireland. The Status of Gibraltar and that of London were also questioned.
In late July 2016, the Foreign Affairs Select Committee was told that Cameron had refused to allow the Civil Service to make plans for Brexit, a decision the committee described as "an act of gross negligence".
Economic effects.
Economic arguments were a major element of the referendum debate. Remain campaigners and HM Treasury argued that trade would be worse off outside the EU. Supporters of withdrawal argued that the cessation of net contributions to the EU would allow for some cuts to taxes or increases in government spending.
On the day after the referendum, Bank of England Governor Mark Carney held a press conference to reassure the markets, and two weeks later released £150 billion in lending. Nonetheless, share prices of the five largest British banks fell an average of 21% on the morning after the referendum. All of the Big Three credit rating agencies reacted negatively to the vote in June 2016: Standard &amp; Poor's cut the British credit rating from AAA to AA, Fitch Group cut from AA+ to AA, and Moody's cut the UK's outlook to "negative".
When the London Stock Exchange opened on Friday 24 June, the FTSE 100 fell from 6338.10 to 5806.13 in the first ten minutes of trading. Near the close of trading on 27 June, the domestically-focused FTSE 250 Index was down approximately 14% compared to the day before the referendum results were published. However, by 1 July the FTSE 100 had risen above pre-referendum levels, to a ten-month high representing the index's largest single-week rise since 2011. On 11 July, it officially entered bull market territory, having risen by more than 20% from its February low. The FTSE 250 moved above its pre-referendum level on 27 July. In the US, the S&amp;P 500, a broader market than the Dow Jones, reached an all-time high on 11 July.
On the morning of 24 June, the pound sterling fell to its lowest level against the US dollar since 1985. The drop over the day was 8% – the biggest one-day fall in the pound since the introduction of floating exchange rates following the collapse of the Bretton Woods system in 1971. The pound remained low, and on 8 July became the worst performing major currency of the year, although the pound's trade-weighted index was only back at levels seen in the period 2008–2013. It was expected that the weaker pound would also benefit aerospace and defence firms, pharmaceutical companies, and professional services companies; the share prices of these companies were boosted after the EU referendum.
After the referendum, the Institute for Fiscal Studies published a report funded by the Economic and Social Research Council which warned that Britain would lose up to £70 billion in reduced economic growth if it did not retain Single market membership, with new trade deals unable to make up the difference. One of these areas is financial services, which are helped by EU-wide "passporting" for financial products, which the "Financial Times" estimated indirectly accounted for up to 71,000 jobs and 10 billion pounds of tax annually and there were concerns that banks might relocate outside the UK.
On 5 January 2017, Andy Haldane, the Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England, admitted that forecasts predicting an economic downturn due to the referendum were inaccurate and noted strong market performance after the referendum, although some have pointed to prices rising faster than wages.
Economy and business.
On 27 June, Chancellor of the Exchequer George Osborne attempted to reassure financial markets that the British economy was not in serious trouble. This came after media reports that a survey by the Institute of Directors suggested that two-thirds of businesses believed that the outcome of the referendum would produce negative results as well as falls in the value of sterling and the FTSE 100. Some British businesses had also predicted that investment cuts, hiring freezes and redundancies would be necessary to cope with the results of the referendum. Osborne indicated that Britain was facing the future "from a position of strength" and there was no current need for an emergency Budget. "No-one should doubt our resolve to maintain the fiscal stability we have delivered for this country ... And to companies, large and small, I would say this: the British economy is fundamentally strong, highly competitive and we are open for business."
On 14 July Philip Hammond, Osborne's successor as Chancellor, told BBC News the referendum result had caused uncertainty for businesses, and that it was important to send "signals of reassurance" to encourage investment and spending. He also confirmed there would not be an emergency budget: "We will want to work closely with the governor of the Bank of England and others through the summer to prepare for the Autumn Statement, when we will signal and set out the plans for the economy going forward in what are very different circumstances that we now face, and then those plans will be implemented in the Budget in the spring in the usual way."
On 12 July, the global investment management company BlackRock predicted the UK would experience a recession in late 2016 or early 2017 as a result of the vote to leave the EU, and that economic growth would slow down for at least five years because of a reduction in investment. On 18 July, the UK-based economic forecasting group EY ITEM club suggested the country would experience a "short shallow recession" as the economy suffered "severe confidence effects on spending and business"; it also cut its economic growth forecasts for the UK from 2.6% to 0.4% in 2017, and 2.4% to 1.4% for 2018. The group's chief economic adviser, Peter Soencer, also argued there would be more long-term implications, and that the UK "may have to adjust to a permanent reduction in the size of the economy, compared to the trend that seemed possible prior to the vote". Senior City investor Richard Buxton also argued there would be a "mild recession". On 19 July, the International Monetary Fund (IMF) reduced its 2017 economic growth forecast for the UK from 2.2% to 1.3%, but still expected Britain to be the second fastest growing economy in the G7 during 2016; the IMF also reduced its forecasts for world economic growth by 0.1% to 3.1% in 2016 and 3.4% in 2017, as a result of the referendum, which it said had "thrown a spanner in the works" of global recovery.
On 20 July, a report released by the Bank of England said that although uncertainty had risen "markedly" since the referendum, it was yet to see evidence of a sharp economic decline as a consequence. However, around a third of contacts surveyed for the report expected there to be "some negative impact" over the following year.
In September 2016, following three months of positive economic data after the referendum, commentators suggested that many of the negative statements and predictions promoted from within the "remain" camp had failed to materialise, but by December, analysis began to show that Brexit was having an effect on inflation.
In April 2017 the IMF raised their forecast for the British economy from 1.5% to 2% for 2017 and from 1.4% to 1.5% for 2018.
Party politics.
Conservative.
On 24 June, the Conservative Party leader and prime minister, David Cameron, announced that he would resign by October because the Leave campaign had been successful in the referendum. Although most of the Conservative MPs on both sides of the referendum debate had urged him to stay, the UKIP leader, Nigel Farage, called for Cameron to go "immediately". A leadership election was scheduled for 9 September, with the new leader to be in place before the party's autumn conference on 2 October. The two main candidates were predicted to be Boris Johnson, who had been a keen supporter of leaving the EU, and Home Secretary Theresa May, who had campaigned for Remain. The last-minute candidature by Johnson's former ally Michael Gove destabilised the race and forced Johnson to stand down; the final two candidates became May and Andrea Leadsom. Leadsom soon withdrew, leaving May as new party leader and next prime minister. She took office on 13 July.
Labour.
The Labour Party leader Jeremy Corbyn faced growing criticism from his parliamentary party MPs, who had supported remaining within the EU, for poor campaigning, and two Labour MPs submitted a vote of no confidence in Corbyn on 24 June. It is claimed that there is evidence that Corbyn deliberately sabotaged Labour's campaign to remain part of the EU, despite remain polling favourably among Labour voters. In the early hours of Sunday 26 June, Corbyn sacked Hilary Benn (the shadow foreign secretary) for apparently leading a coup against him. This led to a string of Labour MPs quickly resigning their roles in the party. By mid-afternoon on 27 June 2016, 23 of the Labour Party's 31 shadow cabinet members had resigned from the shadow cabinet as had seven parliamentary private secretaries. On 27 June 2016, Corbyn filled some of the vacancies and was working to fill the others.
According to a source quoted by the BBC, the party's Deputy Leader Tom Watson told leader Jeremy Corbyn that "it looks like we are moving towards a leadership election." Corbyn stated that he would run again in that event. A no confidence motion was held on 28 June 2016; Corbyn lost the motion with more than 80% (172) of MPs voting against him with a turnout of 95%.
Corbyn responded with a statement that the motion had no "constitutional legitimacy" and that he intended to continue as the elected leader. The vote does not require the party to call a leadership election but, according to "The Guardian": "the result is likely to lead to a direct challenge to Corbyn as some politicians scramble to collect enough nominations to trigger a formal challenge to his leadership." By 29 June, Corbyn had been encouraged to resign by Labour Party stalwarts such as Dame Tessa Jowell, Ed Miliband and Dame Margaret Beckett. Union leaders rallied behind Corbyn, issuing a joint statement saying that the Labour leader had a "resounding mandate" and a leadership election would be an "unnecessary distraction". Supporting Corbyn, John McDonnell said, "We're not going to be bullied by Labour MPs who refuse to accept democracy in our party."
On 11 July, Angela Eagle announced her campaign for the Labour party leadership after attaining enough support of MPs to trigger a leadership contest, saying that she "can provide the leadership that Corbyn can't". Eagle subsequently dropped out of the race (on 18 July) leaving Owen Smith as the only contender to Jeremy Corbyn.
Smith had supported the campaign for Britain to remain in the European Union, in the referendum on Britain's membership in June 2016. On 13 July 2016, following the vote to leave the EU, three weeks prior, he pledged that he would press for an early general election or offer a further referendum on the final 'Brexit' deal drawn up by the new