What is Brexit?

Brexit is short for "British exit." It refers to a vote taken on June 23, 2016, in which British voters voted to leave the European Union. The vote could have profound consequences for Britain, the EU, and the global economy.

Britain has been a member of the European Union (or its predecessor, the European Economic Community) since 1973. But a series of crises have shaken British confidence in the EU. The European Central Bank’s disastrous handling of the post-2008 recession caused sky-high unemployment in Greece and Spain. The Syrian refugee crisis tested Europe’s open-borders policy.

In 2014, Conservative Prime Minister David Cameron was worried about gains by the far-right United Kingdom Independence Party. So to mollify anti-immigration voters in his party, he promised a referendum on British exit from the European Union if he won the 2015 election.

Cameron personally believed that it would be a mistake for Britain to leave the EU, and campaigned for voters to vote to remain in. But other members of his party — including former London Mayor Boris Johnson — campaigned for a "Leave" vote. Also supporting Leave was UKIP leader Nigel Farage, who argued that immigrants were costing Britons jobs, using up government services, and committing crimes. In the end, Leave won, with nearly 52 percent of voters deciding to exit the EU.

As economists predicted, the leave vote is causing economic turmoil. As the result came in, the value of the British pound fell by 10 percent to $1.35, its lowest level against the dollar since 1985. Stock markets around the world fell in Friday trading.

The vote spooked financial markets because the British economy has become deeply intertwined with the European continent. Negotiating Britain’s withdrawal could be a messy, complex process, and the new post-withdrawal rules might make it harder to do business between the UK and the EU — threatening London’s status as the financial capital of Europe.

Brexit could also create big headaches for people moving between Britain and the continent. EU rules guarantee that EU citizens of one country can live and work in any other EU country. There are about 3 million non-British EU nationals living in the UK, and about 1.2 million Brits living in other EU countries. At a minimum, Brexit will mean more paperwork and hassles — and some people could even lose their right to live in the UK and thus be deported.

But it will take years for the implications to become clear. David Cameron announced his resignation on Friday morning, so his successor will have to lead negotiations with the EU over the terms of the post-exit relationship. The leading candidate is Boris Johnson, a more conservative and Euroskeptical figure than Cameron.

EU rules specify that these parties will have a two-year window in which to negotiate new agreements to replace existing EU rules. Those rules cover trade, migration, agriculture, the environment, and more. So negotiations could drag on for years. And uncertainty about the outcome will loom over the British economy. The UK government has estimated that exit could cause the British economy to be between 3.8 and 7.5 percent smaller by 2030 — depending on how well negotiations go. Other reports have found smaller but still significant impacts.