As the UK continues to come to grips with the EU referendum result, Falmouth-based financial advisors Vision Independent Financial Planning tells the Packet that while the "hyperbole" of both sides in the Brexit campaign should not be taken seriously, the referendum has left a lot of uncertainty.

We have all witnessed a historic point in politics, whether you personally voted to remain or leave, the UK as a nation voted to leave the European Union, which will trigger two years or more of negotiations once Westminster formally notifies Brussels of its intention to secede.

There are now significant constitutional issues that must be resolved and far from straightforward, resulting in UK and EU politics having a significant impact on financial markets in the short to medium term.

The government may choose to delay formal notification until the Conservative party leadership situation is resolved and until its policy ducks are in a row. There is even a chance that the UK could remain in the EU – the referendum is not legally binding and Parliament must vote to repeal the 1972 European Communities Act.

Also, despite their rhetoric in the run up to the vote, European leaders may well explore new ways to keep the UK in the EU. Either way, following initial disruption to financial markets, there will be a period of reflection as all parties come to terms with the result. It should be remembered that until it secedes, the UK is a member of the EU and will continue to benefit from the single market – while there will be uncertainty, the full economic impact of this vote will not be felt for some time.

The lasting economic implications will not be known for many years. Of the many questions, most pertinent, perhaps, is will the UK be able to negotiate continued access to the free-trade area?

Further out, what will happen to the EU without the UK? Will it integrate further, dismantling the remaining barriers to trade and investment? This could mean the UK losing much of its considerable market share of European trade. Or will the entire EU project stall?

Economic integration – particularly the removal of barriers to trade – should lead to considerable improvements in productivity over the long term. If Brexit requires the UK to forsake access to the European Single Market, it is imperative that it works hard to enact new trade deals and sign new agreements of economic integration with faster growing economies than the EU.

With an ageing workforce, productivity will be the key driver of economic growth in Western economies in the 21st century. Those economies able to capture the greatest gains in productivity are likely to generate better returns on investment, attract higher portfolio allocations and experience stronger foreign exchange rates.

It is believed that uncertainty will pervade financial markets and weigh on economic growth for at least two years. Uncertainty alone is enough to delay spending, hiring and investing with estimated growth forecasted to be 1-2% lower over the next two years. Investors should be mindful of sectors most correlated with GDP growth, such as certain cohorts within banking, insurance and consumer goods.

Although GDP growth may suffer in the first few years it is not to say that trade and investment will collapse. From survey data that access to the single market is an important factor contributing to the UK’s attractiveness as an investment destination.

The UK ranks as one of the easiest places to do business in Europe (taking into account red tape, tax regimes, etc.), while it also excels as a centre of agglomeration. Moreover, the threat of Brexit did not seem to have a deleterious effect on investment over the last 18 months. Britain even attracted more manufacturing projects than Germany for a second year in a row, despite the threat of tariffs on international trade if the UK leaves the free-trade area.

How will equity markets react? UK- and EU-focused financial stocks have already underperformed their more globally diversified peers this year, although how much of that is due to Brexit and how much to subsiding fears of a China-led emerging market recession (thereby benefiting the global financial plays) is difficult to say.

The volatility of the FTSE 100 has not diverged from other global large cap indices and there has been little evidence of a potential Brexit impacting the relative performance of the FTSE 100. After all, it is far more an index of global giants that happen to be domiciled in London than a barometer of the domestic, or even the European, economy. The 25 companies in the index most exposed to domestic revenue streams have underperformed, but half of that can be explained by the substantial rally in oil and gas and mining stocks – again, a global trend extraneous to Brexit. However, in the last few weeks overseas investors have lowered their allocations to UK and European equities. If this trend intensifies, the FTSE 100 could be affected by such broad-brush asset allocation calls.

There could be a much stronger relationship between domestic economic uncertainty and the equity risk premium of the FTSE 250 and small cap indices, which would mean lower stock market valuations as uncertainty increases.

Although a spike in the equity risk premium would dominate price movements, the effects would be partially mitigated if the Bank of England cuts base rates. Governor Mark Carney has made his fears well known with predictions that the pound will likely settle between 7.5% and 12.5% lower after the results once the initial volatility subsides. The 7% fall in the pound over the six months prior has been attributable largely to changes in interest rate expectations, with the direct contribution from general Brexit uncertainty much more limited.

The result of the referendum leaves a lot of uncertainty. This will weigh heavily on both economic growth and financial markets. As long-term investors we encourage clients not to worry unduly – the politicised hyperbole of the campaign should not be taken seriously. Nonetheless, we face bouts of volatility for at least two years until we know how the UK will interact with Europe economically and financially.