Brexit likely to trigger serious implications for UK, EU

The United Kingdom's referendum is likely to pave new directions for both the UK and European Union. Besides, it shall posit serious implications for other major economies. If the 'leave' camp wins on June 23, this could mean an immense range of economic pain, coupled with political instability and disorder in government cohesion.

According to an estimate by The Economist magazine, real gross domestic product in the UK would be six percent below the previous baseline forecast by 2020 if Britons decide to leave the European Union. The Economist Intelligence Unit expects the shock of a "Brexit" will be front-loaded, but will stretch out to at least 2020.

Financial services in the UK would be the most hit as it would lose access to its economic hinterland in Europe, which will possibly divert corporates away from London to ensure access to the single market. London will, however, be the worst hit, being the global financial hub.

Retailers will also face supply chain complications and regulatory divergence as domestic sales will slump and exporters will lose a majority of the market share.

Moreover, a Brexit would incur a political instability, as well in the European Union. According to The Economist, UK will suffer manifold disruptions along the spectrum of mounting political uncertainty. However, the outlook still depends on the 27 other EU member nations who might seem reluctant to offer a good deal to Britain

"We would caution against underestimating the instinct of the UK’s political and bureaucratic machinery to absorb, rather than allow itself be convulsed by, the shock of a vote to leave," The Economist quoted in its recent release.

Further, immigration would pose a cause of concern to Boris Johnson, former mayor of London to tackle the increasing influx of migrants into the European Union every year. On one hand, delivering on immigration would risk, causing serious economic damage to services exporters, particularly in the large financial services sector, where there is a risk of significant activity being lost to other EU countries. On the other hand, failing to deliver on immigration would immediately undermine a key rationale for the vote to leave.

Finally, there remains a lot to watch out for in the UK referendum with the Brexiteers taking the lead ahead of the Bremainers, though by a slight margin in the latest campaign polls by various corporates. Not only will the European Central Bank face an enigmatic dilemma in terms of a policy formation, but currency trading will also be affected heavily in and out the EU.