Sterling crashes as UK votes for Brexit
The UK electorate has voted to leave the European union in a decision that is sending shockwaves through financial markets. It was only the third referendum in British history (two of which have related to the UK’s role in Europe).
Before the final vote was even in, but with notable sources including the BBC concluding that the Leave vote has won and Remain cannot win, sterling dropped as much as 10 per cent against the US dollar to levels not seen since 1985. To put this into context, the pound only fell 3.9 per cent following the collapse of Lehman brothers back in 2009. Prime minister David Cameron, who had backed the Remain bid, is now in a precarious position politically. EU leaders have reportedly scheduled an emergency meeting for the morning of the 24 June. And the Bank of England is likely to do the same. The decision also contradicts the vast majority of the UK automotive industry, which supported EU membership. What we do know is that we are now in uncharted territory politically, economically and therefore also in terms of the tyre business.
The above text was posted at 5:57 this morning. Since then the final result has been confirmed and 52 per cent of the country voted for the UK to leave the European Union. The turnout was the relatively high figure of 72 per cent. Virtually every UK region voted to leave. Only London, Scotland, Northern Ireland and Gibraltar voted to remain. The greatest support for an EU exit came from the Midlands and the North East of England. Boston was the most Eurosceptic part of the UK. Here, 75.6 per cent the turnout voted in favour of a Brexit.
Following the announcement of the official result, Prime Minister David Cameron announced that he will step down in the next few months.
By late afternoon, the financial situation had improved slightly. The FTSE 100 had fallen by up to 8.7 per cent prompted by the Brexit result and David Cameron’s resignation. After this two Labour MPs instigated a vote of no confidence in the leader of the opposition, signalling further political instability. Nevertheless The FTSE 100 recovered to roughly 5 per cent down. However, when you look at the FTSE 250, the effects of the instability on a broad cross-section of British economy are clear: in the morning this index fell by 12.3 per cent, later in the day it was 7.1 per cent down – both some of the sharpest one-day losses not just for decades, but actually on record.
Sterling also recovered from the 10 per cent drop immediately after the Brexit result, however, the pound is still trading around 8 per cent down on 24 hours ago.
Sterling value against the dollar during the last 24 hours: