Brexit Aftershocks Rattle Markets as Cameron Quits

David Cameron: Britain Needs Fresh Leadership
  • Pound plunges 8 percent, biggest decline ever, as gold surges
  • Bank of England says it will take ‘all necessary steps’

Britain’s stunning vote to leave the European Union spread turmoil across the world’s financial markets and dismay through Europe’s capitals, where EU leaders gave an early warning that the looming divorce talks may prove bitter.

The pound plunged to the lowest since 1985, global stocks tumbled and bonds and gold rallied after U.K. voters backed Brexit by 52 percent to 48. Prime Minister David Cameron resigned after the defeat of his Remain campaign, saying he will serve a few more months before making way for a successor who’ll negotiate the details of departure.

David Cameron makes his resignation speech with his wife Samantha Cameron on June 24.
David Cameron makes his resignation speech with his wife Samantha Cameron on June 24.
Photographer: Chris Ratcliffe/Bloomberg

Boris Johnson, a leading Brexiter and the early favorite to replace Cameron, also said there’s no rush to get the official separation process under way. But EU leaders signaled they have a different timetable in mind. “The U.K. will no longer be part of the EU, and the procedures dealing with its departure will be enacted quickly,” French President Francois Hollande said. In Brussels, a trio of top officials said the U.K.’s government must “give effect to this decision of the British people as soon as possible, however painful that process may be.”

There could be plenty of pain to go around. Britain must now count the economic and financial cost of an EU exit that Cameron warned would tip the country into recession. The outcome also reflects a wider disillusionment among the West’s voters at the unequal rewards of globalization, and that’s why it was cheered by populists in Europe and beyond. Donald Trump said he saw a “big parallel” with his own insurgent presidential campaign, and France’s Marine Le Pen demanded a referendum for her country too.

“This is the biggest shock to European politics since the fall of the Berlin Wall,” said Rob Ford, professor of politics at Manchester University.

‘Panic Is Palpable’

In the markets, Brexit sparked a rout with echoes of the 2008-2009 financial crisis. “Panic is palpable,” said John Gorman, the Tokyo-based head of U.S. debt trading for Asia and the Pacific at Nomura Holdings Inc., even before European markets opened.

The pound was down 8 percent at 8 p.m. in London, a decline almost twice as big as the previous record, on Black Wednesday in 1992 when the currency was forced out of Europe’s exchange-rate mechanism. U.S. stocks tumbled the most in 10 months, and gold surged 5 percent.

Finance officials went into firefighting mode. The Bank of England said it was “monitoring developments closely” and will take all necessary steps to ensure stability. Governor Mark Carney may end up having to cut interest rates or revive quantitative easing. He pledged an extra 250 billion pounds ($345 billion) for the financial system.

“This is not such a good day for Europe,” Deutsche Bank AG Chief Executive Officer John Cryan said in a statement. “We cannot fully foresee the consequences, but there’s no doubt that they will be negative on all sides.”

Go It Alone

That could include the U.K.’s finance industry, which employs more than 2 million people. The City of London’s status as a financial capital will be at risk if U.K. lenders lose the right to sell their products and services throughout the EU. JPMorgan Chase & Co. and HSBC Holdings Plc have said a so-called Brexit would lead them to move thousands of jobs out of London. Beyond banking, companies from Korean tiremakers to French advertisers warned that they’ll reconsider investments in the U.K.

The Brexiters, a rag-tag band of politicians and executives who took on Britain’s establishment, have insisted the country’s economy is strong enough to go it alone. Some of them are likely to be in power as the argument is put to the test. Johnson, the former London mayor, and Justice Secretary Michael Gove are Conservative politicians who broke with their leader Cameron to campaign for an EU exit, and they’re now among the contenders to succeed him.

Michael Gove and Boris Johnson hold a press conference following the EU referendum vote on June 24.
Michael Gove and Boris Johnson hold a press conference following the EU referendum vote on June 24.
Photographer: Stefan Rousseau/PA Pool via AP Photos

Nigel Farage, leader of the U.K. Independence Party, isn’t in line for high office, but his celebrations were the most jubilant. “Let June 23rd go down in our history as our Independence Day,” said Farage, a former commodities broker who’s been campaigning for the U.K. to leave the EU for a quarter century. The Remain campaign accused him of stoking hostility against immigrants with campaign posters warning of an influx of refugees.

Farage’s party resembles those challenging the establishment in other major European countries: Le Pen’s National Front in France, and Italy’s Five Star movement. Defusing their appeal is yet another challenge for the EU and its most powerful leader, German Chancellor Angela Merkel, who’s spent years wrestling with a string of crises, from Greek debt woes to Syrian refugees.


How Britain Voted: Brexit Results

For full coverage of the referendum, click here


Merkel, Hollande and Italy’s Matteo Renzi are set to meet on Monday in Berlin, and the bloc’s finance and foreign ministers may hold Brexit talks before that. The EU leaders must decide how tough they want to be on the U.K. in the negotiations: some may favor making an example of Britain, to stop others from leaving.

Meanwhile, another exit isn’t out of the question: Scottish First Minister Nicola Sturgeon said a second independence referendum for Scotland is “on the table” after the Brexit ballot. Two years ago, the Scots voted to stay in the U.K. But Thursday’s outcome highlighted growing strains on the centuries-old alliance: while English voters turned against the EU, almost two-thirds of Scots backed staying in.

“I don’t know the forces they have unleashed in winning this,” Steve Fielding, a professor of political history at the University of Nottingham, said of the victorious Brexit campaign. “I don’t know this is in the capacity of any one person to control.”

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