The British pound has borne the brunt of the global markets’ savage reaction to the news that Britain has voted to leave the EU, with the currency falling to its lowest value since 1985. The euro has also slumped in the wake of the seismic development.
After 43 years, the UK has decided to quit the European Union. A 51.9pc majority won out over a 48.1pc minority who wanted to stay.
Early analysis from YouGov reveals that 64pc of those who voted to remain were in the 18-24-year-old age group and have about 70 years of life left to deal with the ramifications, while 58pc of those who voted to leave are aged over 65.
‘It is now quite likely the UK economy will flat-line or suffer recession through the second half of 2016’
Last night, most people went to bed thinking the Remain camp would win the day.
However, they awoke to the fact the British people had decided to reject 43 years of EU membership, plunging the 28-state bloc of European countries into its biggest crisis yet.
The UK is the EU’s second-largest economy and a major military power.
What will follow will be exit negotiations that could take up to two years.
The markets recoil
The markets have reacted savagely to the news. Standard & Poor’s has warned that Britain stands to lose its AAA credit rating.
At $1.34, the pound has crashed over 9pc against the US dollar as investors and speculators seek a safer haven for their money.
According to Reuters, UK futures are tipped to open down 6pc. US stock futures are 3pc lower.
The euro has slumped 3.3pc against the dollar to a three-month low of $110 as the news is absorbed.
The Japanese yen, has strengthened sharply against the dollar, dealing a blow to Japan’s fragile recovery.
Across Europe, markets have opened and the sobering news is being reflected in various ways.
SToXX Europe 600 is down 8pc, the FTSE 100 opened down 7.8pc, Germany’s Dax is down 8.6pc and France’s CAC 40 is also down 8.6pc.
In Japan, the Nikkei 225 is down 8pc and Dow Futures is now down 530 points.
The chaotic open to today’s trading is hitting UK stalwart stocks like Barclays and Lloyds, which are both off 30pc.
As the Irish Stock Exchange prepares to open, it is likely Irish shares will plunge today too.
“It is now quite likely the UK economy will flat-line or suffer recession through the second half of 2016,” Davy said in a research note.
“Past macro-econometric estimates suggest that a 1pc reduction in UK GDP reduces Irish GDP by 0.3pc.
“On balance, we do not think Brexit will be sufficient to push Ireland into recession, but it could push Irish GDP growth down by 1-2pc in 2016/17. The danger is, however, that Brexit precipitates a broader European slowdown, or a hasty EU exit period that puts the UK’s single market access at risk.”
London’s financial district image via Shutterstock
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