Sterling fell sharply against the US dollar to its lowest level since 1985 as the UK referendum on the UK’s membership of the European Union saw the voting split 52% to 48% in favour of leaving. UK prime minister David Cameron responded by announcing his intention to step down by October.
In his statement, Cameron announced; “I was absolutely clear [in the referendum] about my belief that Britain is stronger, safer and better off inside the European Union. And I made clear the referendum was about this and this alone, not the future of any single politician, including myself.
“But the British people have made a very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction.
“I will do everything I can as prime minister to steady the ship over the coming weeks and months. But I do not think it would be right for me to try to be the captain that steers our country to its next destination.”
Bank of England governor Mark Carney said that the BoE can provide liquidity in foreign currency if needed and that it will make an extra £250bn available to the banks.
EU leaders and officials will spend today preparing for a crisis session this weekend, ahead of a regular summit next Tuesday and Wednesday. Donald Tusk, president of the European council, said that the EU’s 27 remaining members would assess its future without the UK.
Tusk added that he had spoken to EU leaders in recent days. Members had been prepared for the result and were determined to maintain its unity. “There is no hiding the fact that we wanted a different outcome of yesterday’s referendum,” he admitted. “There is no way of predicting all the political consequences of this event – especially for the UK. It is a historic moment, but not a moment for hysterical reactions.”
Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI), which had backed the UK remaining in the EU, said: “The British people’s vote to leave the EU is a momentous turning point in our history. The country has spoken and it’s for us all to listen.
“Many businesses will be concerned and need time to assess the implications. But they are used to dealing with challenge and change and we should be confident they will adapt.
“The urgent priority now is to reassure the markets. We need strong and calm leadership from the government, working with the BoE, to shore up confidence and stability in the economy.
“The choices we make over the coming months will affect generations to come. This is not a time for rushed decisions. The CBI will be consulting its members and business is committed to working with government to shape the best possible conditions for future prosperity.”
Consulting group Mercer said that companies still face great uncertainty until the UK’s ‘exit strategy’ is defined and trade negotiations with the EU are completed.
According to Deborah Cooper, partner at Mercer: “The UK has not woken up to find itself outside the EU but, by accepting the referendum results, the UK government has packed its bags and is walking towards the door. The next stage is for the UK to invoke Article 50, officially notifying the European Council of the UK’s intention to leave and beginning the formal process of separation.
“Although this process could be started right away, the government could choose not to invoke Article 50 immediately and develop its exit strategy before initiating the official negotiations. In either case, the uncertainty will breed market volatility.”
According to Mark Quinn, partner in Mercer’s talent business: “The immediate implications for companies and employees will depend on their circumstances. In the short term, companies should be analysing exposure they have to the UK and Europe in respect of their workforce’s organisational profiles and their reward plans.
While we don’t know yet what restrictions will be imposed on, say, the free movement of people, it is evident that political, economic, legislative and market uncertainty is unlikely to clear any time soon. Strong employee communications will be critical for companies over the coming months.”
Credit ratings agency (CRA) Moody’s stated: “The UK’s decision to leave the EU will lead to a prolonged period of uncertainty that will weigh on the country’s economic and financial performance and will be credit negative for the UK sovereign and other rated entities.
“The immediate financial market reaction has been pronounced, with sterling depreciating sharply and global equity markets falling. Heightened uncertainty during negotiations over new arrangements between the UK and the EU will likely dent investment inflows and consumer and business confidence in the UK, weighing on its growth prospects.
“While Moody’s does not expect “Brexit” to have major credit implications for most EU-based issuers, the outcome … could increase the risk of political fragmentation within the EU if popular support for the bloc fades among member states.”
For more responses to the referendum result, click here.
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