Chancellor warns: 'it will not be plain sailing'
Osborne bids to calm investor nerves over EU vote
Speaking from the Treasury this morning Mr Osborne said Britain would have to adjust to the new circumstances it finds itself in, but he ruled out an emergency budget.
He said his own future would be determined “in the coming days”, but he indicated that he would continue to have a role in government by saying he would “fight” to keep Britain an open and tolerant country.
His comments just after 7am were timed to calm the markets, in particular the London stock market opening an hour later. Equities and sterling plunged on Friday morning following result of the referendum.
He said the Treasury, Bank of England and the Financial Conduct Authority have spent the last few months putting contingency plans in place, which included the statement issued by the Bank’s governor last Friday.
“We have further thought through contingency plans if they are needed. It will not be plain sailing in the days ahead, but you should not underestimate our resolve. Unlike eight years ago [when the banks crashed] Britain’s financial system is prepared for whatever happens.”
He spoke of creating a new relationship with Europe and said it was right for the Prime Minister to create some time before enabling Article 50 which triggers Britain’s exit from the EU.
“Only the UK can trigger Article 50 but it should only do that when we are clear what we are seeking,” he said.
He acknowledged that as a result of Thursday’s decision some firms were withholding their investments and that this may have some effect on the economy.
“No one should doubt are resolve to maintain the fiscal stability we have delivered for this country. The British economy is fundamentally strong, we are highly competitive and we are open for business.
“I want the strongest possible links with our European nations I do not want Britain to turn its back on the world…Britain is an open and tolerant country and I still fight to keep it so.”
On his own future he said: “There have been questions about the future of the Conservative party and I will address that in the coming days.”
The FTSE 100 opened lower, but was trading only 30 points down, while Sterling was also down, trading 1.8% lower at $1.3460, although this was above the 31-year low of $1.3228 on Friday.
Foreign markets recovered some ground overnight. In Japan the Nikkei 225 rose more than 2% by early afternoon, rebounding from Friday’s 7.9% loss, its biggest since the 2008 global financial crisis.
Prime minister Shinzo Abe held an emergency meeting and ordered the Bank of Japan to do all it could to stabilise financial markets.
The yen has risen as sterling has fallen, and this will make Japanese exports more expensive.
China warned that its companies might want to “wait and see” what the impact is of the Brexit vote before they deciding on their investment strategy.
The Shanghai Composite gained 0.6% to reach 2,870.92 in early morning trading, and in Australia Sydney’s S&P ASX200 added 0.5% to 5,136.80.
Other markets in the region fell, however, days after a worldwide plunge wiped out $2.1tn of value from global markets.
Hong Kong’s Hang Seng shed 0.7% to 20,112.35 and Seoul’s Kospi lost 0.1% to 1,923.13. Benchmarks in Singapore, the Philippines and Indonesia also fell.
CBI calls for immediate action to shore up relations with Europe
The CBI today welcomed the Prime Minister’s announcement of a delay in triggering Article 50 to create breathing space, but said there was a need for rapid clarity on who is making the decisions.
Director General Carolyn Fairbairn, said: “We must agree the principles that should underpin our new relationship with Europe and the rest of the world. At the highest level, the government should resolve publicly to preserve the openness of the UK’s economy, one of its greatest strengths.
“This means seeking to protect tariff and barrier-free access to the Single Market, ensuring companies are able to continue to attract the best people to the UK with the skills we need, while recognising public concerns about immigration. And, it means setting out clearly how the UK will agree the right international trade deals with the wider world.”
Ms Fairbairn said the government must take action “to forge close and deep collaboration between business of all sizes across the UK and the government to help shape our future economic relationships.
“The CBI and business leaders across the UK stand ready to work with the new leaders of our country to help chart the future course, starting as soon as practically possible.”
Ms Fairbairn added: “The government should remove uncertainties over the long term right to stay in the UK for those already working here as soon as possible.
“No one pretends this transition will be easy or that the change will be pain free. But now is the time for businesses across Britain to come together in partnership with government and communities to turn the will of the British people into a new set of world relationships that benefit everyone.”
Angela Merkel, the German Chancellor, has indicated that European leaders will not force Britain into early negotiations.
Sunday: Chancellor George Osborne will emerge from his self-imposed exile to issue a statement aimed at calming nerves on world markets in the wake of the Brexit vote.
Mr Osborne, whose whereabouts has been questioned since Thursday’s referendum, will aim to avoid further sharp movements in the currency and equity markets by convincing investors that Britain’s economy remains strong.
In a statement due out ahead of the London Stock Exchange opening at 8am, he will set out a series of measures to protect the national interest.
Even so, the FTSE 100 is expected to open 2% down and amid speculation that the pound, which suffered its biggest one day loss on Friday, could slump to as low as $1.20 in the coming weeks.
Some $2 trillion was wiped from the value of world companies and Britain’s credit rating outlook was downgraded by Moody’s. Economists have cut their growth outlook for the British economy.
There is also talk of the bank base rate being cut to 0% and for quantitative easing to be resumed in August.
Mark Carney, the governor of the Bank of England said on Friday that it would do whatever was required to ensure financial stability, but business leaders say the decision to leave the EU should not be a signal to introduce protectionist policies.
Mr Osborne’s future has been questioned since the defeat of the Remain camp and a rising tide of opposition to his threat of deep spending cuts and tax rises in an emergency budget. It is unlikely he will now deliver it as too many Tory backbenchers say they would vote it down.
His supporters insist he will not resign and there has been speculation that he still fancies his chances of winning the party leadership and thereby succeeding David Cameron as Prime Minister.