The United Kingdom now has three options for a formal deal with the EU, says a professor of economics at Lancaster University.
Prof Geraint Johnes, who is based at the uni’s management school, said the key thing now is for the UK to get an emergency break to help manage the situation.
He also said David Cameron announcing his resignation had “made the situation more difficult” and the Prime Minister “should have stayed to see things through.”
Prof Johnes said: “It’s been clear across all parties that a decision to leave the EU would lead to an adverse economic shock.
“In terms of the short terms affects, there’s been debate about magnitude, but there’s no debate about there being a short term shock.
“How severe the shock is will depend on where we go from here.”
Prof Johnes said there are now three options for the UK if and when it invokes Article 50 – a very basic five-point plan should any country wish to leave the European Union.
This would be the first time the get out clause has been used it has been used.
The UK voted 51.9 per cent of leaving the EU on Thursday June 23.
“We could be within the EU Economic Area similar to Norway, or we could havea free trade agreement with Europe, similar to Canada, and that would take many years to achieve,” said Prof Johnes.
“Then there’s the option to trade under the World Trade Organisation rules with Europe, and that would mean that we would enter the Common External Tariff.
“For example, with cars, the EU would put a tax of 10 per cent on any car we wanted to export to the EU, which would make cars more expensive to buy and reduce the demand for our cars.
“In turn companies like Nissan will probably move to other European countries and that will take jobs away.
“I’m sure new jobs will come but whether they are as good remains to be seen.”
Prof Johnes said “the easiest and the least disruptive” deal would be to be a part of the European Economic Area, like Norway.
He said: “But that means we would still be in the single market and that would mean we would still have to accept the free movement of labour.
“Immigration has come out as something that’s bothering people.
“But the Norway option is the only one that we can bring in quite quickly.
“What I would like to see is for us to negotiate an emergency break, to go for the Norway option but have an emergency break on immigration, similar to the one on benefits that David Cameron organised recently, for five years, and that would help us manage that situation.
“But whether Europe would buy that, I don’t know.”
Prof Johnes said the economic consequences of Thursday’s decision would be “catastrophic” if tariffs were introduced.
“If we end up facing tariffs, and remember half our exports go to Europe, that would reduce demand, because we will find it hard to export and that will threaten jobs and wages in this country.
“The really key thing after the vote should have been let’s get some certainty about the future.
“Instead we’ve got a leadership contest, so we’re not going to get that certainty and it’s going to harm business investment.
“I think Mr Cameron should have carried on to see this through.
“It makes the situation more difficult.”
David Cameron said he would leave Number 10 by October, and former London Mayor and MP for Uxbridge and South Ruislip Boris Johnson is the favourite to become the next Prime Minister.
Morecambe and Lunesdale MP David Morris also said he would “throw his hat in the ring” if he didn’t like any of the candidates.
Prof Johnes said it would take at least two years to disengage with Europe.
“We won’t see anything immediately other than the lack of confidence from business.
“The new government will face a really difficult task to minimise the economic consequences of the decision, while at the same time satisfy the claim to do something about immigration.”
He added: “In terms of university and higher education funding, the EU gives funding to depressed regions, agriculture and higher education research, so we will no longer have access to that.
“But it all depends on what the new government will do. It could decide to mimic what the EU was doing.
“There is a lot up in the air at the moment, and we need to have some certainty.
“In the Lancaster and Morecambe area, health and education are big employers, and we need to pay careful attention of what the effects of Brexit will have on public spending.”