Mark Carney, governor of the Bank of England:
“It will take some time for the UK to establish a new relationship with Europe and the rest of the world. So some market and economic volatility can be expected as this process unfolds, but we are well prepared for this.
“Her Majesty’s Treasury and the BoE have engaged in extensive contingency planning and the chancellor and I have remained in close contact including through the night and this morning. The BoE will not hesitate to take additional measure as required, as markets adjust.
“The capital requirements of our largest banks are now 10 times higher than before the financial crisis. The BoE has stress-tested those banks against scenarios far more severe than our country currently faces. As a result of these actions UK banks have raised over a £130bn of new capital and now have more than £600bn of high quality liquid assets. That substantial capital and huge liquidity gives banks the flexibility they need to continue to lend to UK businesses and households even during challenging times.
“Moreover as a backstop to support the functioning of the markets the BoE stands ready to provide more than £250bn of additional funds through its normal market operations. The BoE is also able to provide substantial liquidity in foreign currency if requires. We expect institutions to draw on this funding if and when appropriate.”
Micheal Henderson, lead economist, Verisk Maplecroft:
The plunge in markets confirm that the risk of Brexit had not been priced in to any large extent. Pound Sterling and UK equities are significantly weakened and the sell-off is likely to continue. This could force the BoE to intervene to stabilise financial markets, potentially via higher interest rates.
The vote is a big hit to confidence in the UK’s standing as a global hub for business and trade. Uncertainty over the future of the UK economy will undoubtedly depress investment, weighing on growth and job creation.
The possibility that Scotland will withdraw from the UK is a further hit to the notion of the UK as a global economic power, and will reduce the clout of the UK government in its future trade negotiations with third parties.
While the weaker pound may provide some respite by making some exports more competitive, the impact will be marginal in the grand scheme of things. The uncertainty caused by the Brexit vote may further restrain already weak global demand.
London’s future as a pre-eminent financial centre is uncertain. There is a strong possibility that the eurozone will challenge the City’s status as clearing hub for euro trading and some multinationals are likely to move their headquarters to continental cities.
Much uncertainty prevails over the longer term outlook for UK trade with the world. The country will have to negotiate not only its divorce from the EU and a new trading relationship with the remaining 27 member states but also its terms for World Trade Organisation (WTO) membership on an individual basis. In addition to this comes the need to negotiate trade agreements with other countries outside of the EU.
James Stanton, head of foreign exchange, deVere Group:
“The Brexit victory has dragged the pound down, as was expected. But the scale of the drop has been a shock – it plummeted to its lowest level since 1985. However, moving forward as the dust settles, it can be expected that GBP/USD resistance could be found at 1.35 with support levels found above 1.38. Similarly, I believe that GBP/EUR will soon test levels at 1.20.
“In the longer term, I think that the euro will be fundamentally weakened by Brexit, as it could serve as catalyst for full EU break up as other member countries calling for referendums.
“This news was always going to create a huge panic sell-off and bearing in mind the wider impact this will have on the euro, many sensible investors will be seeking to look to cash in on a Brexit-battered pound.
“UK banks are stress-tested to deal with this kind of news, as Mark Carney, the Governor of the Bank of England has said this morning, and will offer a lot of support during these testing times.
“We can expect the pound to begin to stabilise over the next week, thereby creating better selling opportunities for investors and, indeed, the wider public. I strongly believe GBP/EUR will recover back nearer to the 1.30 mark and GBP/USD to 1.45 by the year’s end.”
Philippe Gelis, chief executive officer (CEO) and co-founder, Kantox:
“We cannot be naive: what we are facing here is not an only-British issue, but a European one. Spain is having a general election vote in two days. Everything is connected. We’ll soon discover how today’s result will affect them. Businesses operating on a European level need to brace themselves for continued volatility that can be expected to continue for many months, if not years, to come.
“In terms of foreign exchange, it looks clear that markets will overreact in the short-run. We have already seen the pound (GBP) drop to its lowest level since 1985. Some analysts point out that the markets could suffer a devaluation of 20%.
“Today’s world economy is global, and the exit of UK will affect every currency. Especially, the US dollar (USD), whose relationship with the EUR and GBP is very narrow. The GBP’s stabilisation will depend on the announcements disclosed in the following months, and the agreements reached – and the way those affect the different industries exposed to GBP, including investments and external trade.”
Law firm Hogan Lovells:
“Brexit does not happen immediately. The UK government now needs to decide when it will serve notice and trigger the two-year exit negotiation period. On Brexit taking effect, all existing UK arrangements with the EU and through its EU membership the UK’s trading arrangements with the rest of the world will lapse, unless replacements are agreed.
“Negotiations and capacity constraints will mean that priorities and potential compromises need to be identified by the UK government (and its counterparts), as well as decisions on which trading arrangements with new or existing markets to progress. Engage early to ensure your business priorities are not the compromises.
John Nelson, chairman, Lloyd’s of London:
“I am confident that Lloyd’s will stay at the centre of the global specialist insurance and reinsurance sector, and I look forward to continuing our valuable relationship with our European partners.
“For the next two years our business is unchanged. Lloyd’s has a well prepared contingency plan in place and Lloyd’s will be fully equipped to operate in the new environment.
Michael Kent, CEO and founder Azimo:
“We’re disappointed that the British electorate has decided to leave the EU; we passionately believe that the world needs less borders not more.
“As we’ve said before, this is also a blow to London’s financial services industry: many companies here depend on both EU market access and the ability and legal right to passport their services to the rest of Europe. I anticipate that we’ll see many finance players moving some, or potentially all, operations to elsewhere in Europe. Frankfurt, Amsterdam and Dublin are all obvious candidates.
“As an entrepreneur, the most difficult part about this entire debate and vote has been the uncertainty it has created. Even now that we know that the final decision is to “Leave” the EU, we do not know how this is going to evolve in the next few months and it could even take years. We’re not worried about our business.
“We’re in a unique position as a well-funded start-up to be able to respond to changing market conditions quickly and easily. The good news is that the financial technology [fintech] industry is thriving across the whole of Europe at the moment, should London’s position as the heart of European fintech now change as a result of this vote.”
Angus Dent, chief executive, ArchOver:
“The outcome is a disaster for this country. You can expect foreign businesses, institutions and other investors to start pulling out of the UK. The Chancellor will be forced to put together an emergency Budget to plug the gap and this country, which was on course to become the world’s fourth largest economy, will now go backwards. What a waste of all the hard work.”
Phil Foster, managing director of Love Energy Savings:
“For small and medium enterprise (SME) owners, one of the issues that is now front of mind, will be how this affects their recruitment strategy.
“UK businesses of all shapes and sizes have, at some point or another, relied on the European Union to supplement their workforce. The UK is still in the midst of a skills shortage, and EU migrants have provided many of the vital skills that we were lacking. There is a chance that the UK will no longer be the talent magnet it used to be, resulting in more bureaucracy and a reduced candidate pool for SMEs to dive into.
“However, the alternative view is that the Brexit will actually improve recruitment options for UK businesses. There is a very real possibility that the UK may now introduce a points-based system, such as that used in Australia, which could result in us welcoming in higher quality candidates.”
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