Cameron Rejects Repeat Brexit Vote as U.K. Bank Stocks Plummetby , , and
Prime minister says no ‘plain sailing’ ahead for Britain
Merkel will convene crisis talks with other European leaders
Prime Minister David Cameron rejected calls for a do-over vote on leaving the European Union and assigned a team of officials to prepare for withdrawal following the referendum last week that stunned the world and triggered financial-market turmoil.
The pound extended its drop to touch the lowest against the dollar since 1985 and shares of some of Britain’s biggest banks plummeted after a weekend in which Cameron’s administration appeared rudderless. Scotland’s government also floated a referendum on its own independence, leaving the U.K. under the threat of breakup as well as the EU.
While Brexit won’t be “plain sailing” as the country adjusts, “Britain is ready to confront what the future holds for us from a position of strength,” Cameron, who announced his intention to resign in the wake of the vote, told the U.K. Parliament on Monday. “Britain will be leaving the European Union but we must not turn our back on Europe or the rest of the world.”
The rhetoric brought policy makers no closer to clarifying just what the U.K’s new relationship with the EU will look like and how badly the economy will suffer from the rupture. As German Chancellor Angela Merkel and fellow European leaders kicked off a series of crisis talks, she urged Britain to get on with it. “An extended waiting game” was bad for both sides, she said.
A new Cabinet Office unit, comprising officials from the Treasury and Foreign Office, will start laying the groundwork for leaving the EU, which Britain joined in 1973. Helen Bower, Cameron’s spokeswoman, told reporters in London after the cabinet meeting that a second referendum was “not remotely on the cards” following a public petition for one.
The BBC reported that the House of Commons is investigating allegations of fraud in connection with the petition, which had more than 2.5 million signatures.
Europe’s leaders must decide how to treat Britain in the divorce talks and what steps to take to reinforce confidence in a bloc facing the departure of its second-biggest economy. Failure to deliver a strategy could prompt markets to force their hand -- as they did after the collapse of Lehman Brothers Holdings Inc. and Greece’s debacle.
Merkel, speaking to reporters in Berlin Monday, said the U.K. has to file official notification of its intention to leave before talks can start on its future relationship with what would be a 27-member EU. She said, though, it may take some time for the government to invoke Article 50 that triggers the countdown to an EU exit.
U.S. Secretary of State John Kerry arrived in Brussels today and then went to London to assess the situation first hand. “There are ways to smartly move ahead in order to protect the values and interests that we share in common," Kerry said in Rome on Sunday.
Cameron addressed parliament as the race to replace him nears, with pro-Brexit campaigner Boris Johnson and Home Secretary Theresa May among likely contenders. The Conservative Party today accelerated the timetable to elect a new leader, bringing the date forward by almost a month to Sept. 2.
Members of the splintered government sought to reassure investors they’ll be able to navigate the fallout. Chancellor of the Exchequer George Osborne broke his silence to declare “you should not underestimate our resolve” to limit an “inevitable adjustment” in the economy. Johnson, the favorite to succeed Cameron, said “the negative consequences are being wildly overdone, and the upside is being ignored.”
He also gave his backing to Bank of England Governor Mark Carney, who was criticized by the Brexit camp during the campaign for outlining the economic consequences of leaving.
Osborne, who had warned that a Brexit would trigger a “DIY recession” and require an emergency squeeze of fiscal policy, downplayed those warnings on Monday. Instead, he pledged to “do everything I can” to make the new order work and revealed other contingency plans are available to soothe the transition if needed. He said he will reveal his own career plans in coming days.
The pound slumped 3.4 percent to $1.3218 at 4:55 p.m., bringing its decline to more than 11 percent since the referendum. The FTSE 100 fell 2.6 percent and 10-year gilt yields fell below 1 percent for the first time on record. An index of U.K. banks fell 7.3 percent, extending Friday’s 10 percent drop. The shares of Barclays Plc and Royal Bank of Scotland Plc fell so fast that they were halted.
In the days before the vote, billionaire George Soros had warned that the pound could slump more than 20 percent against the dollar because the true cost of Brexit was being underestimated. Still, Soros, whose 1992 bet against the pound made investing history, didn’t repeat the gamble while he was arguing for Britain to remain in the EU.
Economists are already downgrading their economic outlook. Goldman Sachs Group Inc. predicted a recession by early next year and interest rate cuts from the Bank of England. EasyJet Plc and Foxtons Group Plc warned they may take a hit, and almost two-thirds of members of the Institute of Directors said the Brexit vote is negative for their business. EasyJet shares were down 18 percent, while Foxtons tumbled 22 percent.
The sense of chaos in British politics was deepened by the revolt in the opposition Labour Party. Leader Jeremy Corbyn vowed to stay on despite a string of resignations from his shadow cabinet and a refusal by his own deputy, Tom Watson, to publicly back him. Labour spokespeople on business, energy and pensions all resigned on Monday along with at least 17 other members of the team, adding to 12 departures on Sunday.
In Scotland, First Minister Nicola Sturgeon will seek a mandate from the Scottish Parliament in an emergency debate on Tuesday to protect the nation’s place in the EU after it voted 62 percent to 38 percent in favor of remaining. She has said a referendum on independence, less than two years since the last one, was now “highly likely.”