Britain has swept away 50 years of foreign policy, turning its back on the EU in an extraordinary political upheaval that deposed its prime minister, sank its currency and reopened the possibility of Scottish independence.
After a lengthy and bad-tempered referendum campaign, Britons voted by 51.9 per cent to sever the country’s 43-year membership of the EU, sending tremors across Europe and triggering global financial market turmoil.
Markets expecting a Remain victory were caught completely off-guard when the first results landed. In a frantic day of trading, the pound dived to a 30-year low, setting a record intraday swing of more than 10 per cent between its high and low points; the FTSE 100 slumped 8.7 per cent on opening before trimming losses to 4.3 per cent. Bank stocks took a hammering, with Lloyds down 21 per cent, Royal Bank of Scotland down 18 per cent and Deutsche Bank falling 14 per cent.
The Euro Stoxx bank index fell 17 per cent, back to levels last seen at the depths of the eurozone debt crisis in August 2012.
US equities tumbled by more than 2 per cent as Wall Street joined a global flight to safety. The US dollar posted one of its biggest rallies on record and gold prices shot higher.
An emotional Mr Cameron said he would remain in office for the next few months to “steady the ship” while the Conservative party chose a new leader but that Britain needed “fresh leadership” to take it in the new direction chosen by voters.
The vote dismayed Britain’s allies and pitched the country into a period of deep political and economic uncertainty. It also posed an existential challenge to the EU after nearly six decades of integration. “It’s an explosive shock. At stake is the break-up, pure and simple, of the union,” French prime minister Manuel Valls said. German chancellor Angela Merkel called it a “turning point for Europe”.
The ramifications of the decision were laid bare when Nicola Sturgeon, first minister of Scotland, which voted heavily to stay in the EU, said a second vote on independence was “highly likely” two years after the last plebiscite.
London also ran into immediate resistance from the rest of the bloc, where there is growing impatience with the British. EU leaders, who will meet without Mr Cameron on Wednesday, said there would be no renegotiation of Britain’s membership terms and demanded that the UK swiftly engage in exit talks and invoke article 50 of the EU treaties, which sets a two-year deadline. EU officials said their warning was not aimed at Mr Cameron but at his successor, who is expected to take over by October.
Finance minister George Osborne is expected to stay in his job until the autumn to help stabilise the economic situation. His allies said that “cabinet will continue” and that they did not expect him to move from the Treasury in the near future.
Mr Cameron had gambled his political future on the referendum but his hopes of securing a Remain vote evaporated as voters in Labour heartlands turned out in huge numbers to deliver a stunning rebuke to the establishment and the status quo.
The result revealed deep divisions across Britain, with prosperous London and Scotland voting by large margins to stay in. Working class towns, seaside resorts and rural England heavily backed Leave.
The Brexit vote stunned the political establishment. Even though the outcome was expected to be close, the final opinion polls had pointed to a narrow victory for Remain. Nigel Farage, the UK Independence party leader who did more than anyone to bring the referendum about, had all but conceded defeat just after the polls closed.
But as the first results came in from the north-east of England, it soon became clear that Leave voters had turned out in greater numbers. The vote reflected a roar of rage from those who felt alienated from London and left behind by globalisation.
Boris Johnson, the former mayor of London who spearheaded the Leave campaign and is now favourite to take over as prime minister, paid tribute to Mr Cameron as a “brave and principled man” but insisted holding the referendum was “right and inevitable”.
Looking subdued and lacking his usual ebullience, he said: “The EU was a noble idea for its time. It is no longer right for this country.”
Even though European leaders were pressing for a speedy start to exit talks, Mr Johnson said there was “no need for haste” and indicated that Mr Cameron’s successor should be in place before the formal process was triggered.
Mark Carney, governor of the Bank of England, said it would “not hesitate to take additional measures as required as markets adjust”, insisting that the BoE was “well prepared” for volatility after extensive contingency planning. He said the financial system was more resilient than during the financial crisis.
The US Federal Reserve and the European Central Bank said they were standing by to inject extra liquidity.
Central bankers will discuss the turmoil in Basel over the weekend at a pre-scheduled meeting at the Bank of International Settlements.
The market mayhem revived concerns about stresses in the eurozone’s periphery. Southern markets suffered their worst trading day in history. Spain’s Ibex index tumbled 12.35 per cent, its largest decline since launching in 1992. The main Milan index fell 12.5 per cent while Italy’s 10-year debt spiked by 30bp to 1.53 per cent.
The vote to leave could have immediate consequences for UK businesses beyond the City of London. Shares in airlines, travel companies and media groups were particularly hard hit.
An early casualty could be London Stock Exchange group’s planned $20bn merger with Deutsche Börse. Executives on both sides of the deal voiced fears the vote would put pressure on German watchdogs to block the tie-up because the merged entity would be based in London. It could also damage the chances of Tata Steel, Britain’s biggest steel producer, maintaining its operations in the UK.
