Two weeks after the UK surprisingly voted to leave the European Union, the economic and political landscapes in the U.K. have continued to darken. "The U.K. has entered a period of uncertainty and significant economic adjustment," said Mark Carney, the governor of the Bank of England, at a news conference Friday in which he said that the bank wouldn't be able to counteract economic instability following Brexit. "The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds."
The pound has plummeted to its lowest mark against the U.S. dollar in three decades. London's equity markets have fallen and there are signs that investors are abandoning U.K. real estate. Meanwhile, a new leader to replace Prime Minister David Cameron and guide the country as it cuts ties with the EU has yet to emerge.
To be sure, it will take time for the full impact of the British referendum to become apparent. The country must disengage itself from the agreement, which has roots in the early 1950s but became a formal entity in the Maastricht Treaty of 1993, and create new trade pacts with trading partners on the continent. The U.K. will have to establish new policies on immigration.
But fundamental changes will occur, although their long-range impact is uncertain. Below are three areas of concern in the post Brexit months ahead.
1. Property Risk
On Tuesday, the Bank of England warned that prices for domestic commercial properties could fall significantly. Its financial Policy Committee also warned,"Valuations in some segments of the market, notably the prime London market, had become stretched."
Foreigners had been some of the biggest investors in U.K. property in recent years. But in a financial stability report, the Bank of England said that foreign investment capital had dropped 50 in the first quarter.
Two major, British asset managers blocked investors from taking their money out of real estate funds. One of the funds, Aviva, said in a note to investors that it was suspending trading in its Aviva Investors Property Trust because of "higher than usual volumes of requests to sell units."
"It would not surprise me if similar firms take similar actions in the coming weeks," Hargreaves Lansdown senior analysts Laith Khalaf told The Wall Street Journal.
2. Pressure on the Pound
The pound reached its lowest level against the U.S. dollar since the 1980s, touching $1.30. It is expected to remain weak, at least until the impact of Brexit becomes clearer.
"It will take time for the United Kingdom to establish new relationships with the European Union and the rest of the world. Some market and economic volatility is to be expected as this process unfolds, " the Bank of England said in its Financial Stability Report.
3. Political Instability
Great Britain has been among the world's most raucous but stable democracies. Its leaders have been well-regarded globally.
But following David Cameron's resignation, it's now unclear who the next prime minister will be, and more importantly, if this new leader will be able to address post-Brexit challenges.
Last week, the favorite to replace Cameron and most prominent Brexit advocate, Boris Johnson, said that he would not run for prime minister after former ally Michael Gove withdrew his support. Gove, Cameron's justice secretary, is running for the position, although he finished third on Tuesday in the Conservative Party's first round of voting.
The winner by a large margin was long-time home secretary Theresa May, who opposed Brexit but has campaigned as someone who could manage the aftermath of the vote.
Behind May was Andrea Leadsom, a junior energy minister who was a loud campaigner for Brexit.
The vote made May the favorite but hardly guaranteed her a victory. Leadsom led by a percentage point in a poll published Monday by the ConservativeHome website.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.