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Brexit spillover effects may persist for years: Report

Many economists have lowered growth forecasts for Britain and broader EU after the referendum vote

IANS  |  Washington 

Bracing up for brexit impact

Britain's June vote to leave the European Union (EU) could have spillover effects for years, according to a recent report released by the Office of Financial Research in the US Department of Treasury.

"Although the immediate market volatility has subsided, the policy uncertainty and the ultimate financial and political spillovers may last for months or years, leaving markets vulnerable to further confidence shocks," Xinhua news agency quoted the Office of Financial Research as saying on Thursday in a report on the markets monitor of the second quarter.

The report said the British government is expected to respect the result of the country's vote on June 23 and formally move to exit the EU, but "uncertainty remains about if, how, and when will be implemented."

The vote has already led to political turmoil in and affected the political landscape in other member countries.

Former Conservative Party leader announced his resignation as British Prime Minister on June 24, just hours after the Britons voted by a 52-48 majority to leave the

After weeks of the Conservative leadership contest, former British Home Secretary became the Conservative Party leader on Monday and took over as new Prime Minister on Wednesday.

May said on Friday that she would not trigger Article 50 of the Lisbon Treaty, a procedure through which a country withdraws from the EU, until her government has "a approach and objectives for negotiations".

"Negotiations will not begin immediately.

Once they do, the and have two years to negotiate an exit under the Lisbon Treaty, which sets the procedures," the report said, noting that negotiations may have "far-reaching legal and economic implications" for the large cross-border financial industry and foreign investment in

Many economists have lowered forecasts for and broader after the vote, and some predicted a recession in by early 2017, as consumers and businesses might postpone spending and investment due to uncertainty, Xinhua news agency quoted the report as saying.

The International Monetary Fund has warned that significant uncertainty surrounding was likely to dampen economic in Britain, Europe and the rest of the world, and the British economy could shrink 0.8% in 2017 if it leaves the

Brexit's full effects on British and European economies and financial systems will depend on those policy decisions, unfolding over the coming months and years, the report said.

According to the report, in a severe scenario, shocks from and Europe could affect US and financial stability through trade linkages, large direct financial exposures, or confidence and indirect effects.

First Published: Sun, July 17 2016. 01:58 IST