Pound plunges as Britain votes for Brexit
THE UK has narrowly voted to leave the EU sending the global financial markets into turmoil with the pound falling to a 31-year low.
After months of campaigning and early predictions of a narrow win for the Remain vote, the political map of Europe was turned upside down as the UK voted 52% to 48% to leave the EU after 43 years.
The turnout was 72%, with 30 million people voting on what is an historic day for Britain.
The Remain camp called the political shift “seismic”, with the Leave campaign saying there were now massive opportunities for the UK to liberate its future once the early hysteria had died down.
Having the rug pulled from under their feet, the Remain camp called for stability – although the fate of the Prime Minister and his strongest allies, such as Chancellor George Osborne remains uncertain.
The vote highlighted the massive divisions which have been inherent in the country for some time, with England and Wales appearing the more Eurosceptic and Scotland and Northern Ireland favouring staying in the EU. The latter now faces the prospect of a closed border with the neighbours in the Republic.
London voted strongly to stay in the EU but elsewhere, especially in the Midlands the result reflected the national trend.
Elsewhere, Leeds was split almost 50:50, while Manchester voted in favour of staying within the EU.
The economic futures of the Northern Powerhouse and more especially, the Midlands Engine must now have big question marks attached to them.
With the economic turmoil beginning to be felt, Labour’s Shadow Chancellor John McDonnell said the Bank of England may have to intervene to shore up the pound.
There will be pressure on the Bank with inflation likely to rise as foreign goods become more expensive.
The Remain camp has been naturally reticent but UKIP leader Nigel Farage told his supporters that the vote was a victory for ordinary people.
Mr Farage, who had initially hinted at a Remain win, said today would “go down in history as our independence day”.
He has already called for David Cameron to step down – although 84 MPs on the Leave side have put their names to a letter urging the Prime Minister to stay on.
Commenting on the market impact, Bill O’Neill, Head of the UK Investment Office at UBS Wealth Management, said: “Westminster, Brussels, the Bank of England and the European Central Bank will be under immediate and immense pressure to calm the markets. But the markets will not wait, they are a discounting machine and they will overreact first, think later.
“Over the next 12 months we expect sterling to fall toward 1.30 against the US dollar, gilt yields to fall back towards 1% and the FTSE100 to drop by 10% from levels before the vote. The euro and European equities will also come under pressure with the whole European project now under something of a cloud.”
Most economic analysts, while still digesting the result, said it was a certainty that the UK economy would be negatively impacted by the vote.
Fears of a recession have been raised, with predictions the second half of the year is now likely to stagnate.
“A confrontational, vexatious transition could see the UK courting a recession in 2017. We would expect a prolonged period of uncertainty and consumers will very quickly sense the challenges out there. The Bank of England will be under pressure to cut interest rates and/or reintroduce quantitative easing,” added Mr O’Neill.