What will happen if UK chooses to exit EU?

Vote on EU referendum is scheduled on June 23rd, 2016 and if Britons do vote in favor of exiting that will automatically invoke Article 50 negotiations of Lisbon Treaty.

So what is this Article 50?

Article 50 is a provision in Lisbon Treaty, which is constitutional foundation of European Union, under which -

• If a member (UK) state chooses to withdraw its membership from the union, it will notify the council and the council will start negotiating an agreement with that state (UK).
   
• That agreement will include, all settlements, arrangements for exit and future relations. This future relation is vital as it will include negotiations over Free Trade Agreement (FTA), currently active.
   
• While council will act as representative, it would need approval of European parliament.
   
• Current treaty automatically gets cut off within two years, even if an agreement is not reached between the state (UK) and EU. That period can only be extended by unanimous voting by member states.

If UK ever wants to return to EU, it is possible and it would invoke Article 49 of Lisbon treaty. Let that be discussion for another time.

Key takeaways

• Financial market may react in a very volatile way but one thing is clear, no immediate hell for both the parties as status quo may continue for at least two years even if UK leaves EU.

Pound only recently has found some support, currently trading at 1.407 against Dollar.