The result of the June 23th United Kingdom referendum shocked the world. The sudden drop in the exchange rate of the British Pound on the following days supports this very clearly (see Figure 1, 23 to 30 June 2016). In the following brief analysis we describe potential effects of Brexit that may have an impact on Hungary in the medium term. In our work we summarize the conclusions of the Hungarian and international literature related to the UK’s withdrawal from the European Union. The most obvious result of the referendum so far is the financial and political uncertainty that is dominating Europe. Another effect may be a significant decline in the Hungarian Gross Domestic Product in 2016 and the next few years.

The results of the latest IEER SME Outlook business climate survey reveal less favourable economic conditions compared to the previous quarter: the Business Climate Index decreased from 31 to 27 points. Thus the upward trend since last October was broken. While enterprises regard their current situation more favourable compared to the previous quarter, they consider their future prospects more negatively than in April. It means that the SME sector predicts a turning point in the trends of domestic business climate.

The Uncertainty Index is at a current level of 36 points, which is almost the same as the value measured in the preceding quarter (it was 37 points in April 2016). The value of the Uncertainty Index indicates that the current trend is not uniform within the private sector, and that it will continue to be confined to one part of the economy and will not be felt by all small and medium sized companies.