Prime minister David Cameron’s hopes of securing a Remain vote have been dashed as 51.9 per cent voted to sever Britain’s 43-year membership of the European Union and 48.1 per cent voted to stay in.
As the results came in during the early hours of today (24 June) and it became clear that pollsters had got it wrong and the UK was leaving the European Union, the pound dived to a 30-year low.
The pound swung by more than 10 per cent between its high and low points and FTSE 100 futures slumped 8.5 per cent.
Just over a week ago, the pound approached $1.40 to the dollar and then surged, peaking at $1.5018 as polls were released soon after voting ended that suggested a Remain victory and UKIP leader Nigel Farage appeared to concede defeat.
At the time this article was published (24 June) the pound hit a low of $1.3224, a level last recorded in 1985.
The pound has rarely been valued at less than $1.40 apart from during the mid-1980s era of extreme US dollar strength.
Earlier this week, billionaire George Soros - who forced then prime minister John Major to pull Britain out of the ‘European Exchange Rate Mechanism’ in 1992 - claimed the collapse in the value of the pound today could be even bigger than Black Wednesday.
Within minutes of the markets opening this morning the FTSE fell 7 per cent.
The oil price declined immediately by around 5 per cent as the likely result of the vote became clear, suggesting expectations for a marked decline in global demand.
Other early indicators included declines in the Australian, Hong Kong and Japanese equity markets, which were still in session as the results were being announced.
Bond yields immediately declined (prices rose), as investors began to seek perceived safe havens.
This morning the Bank of England stated it was monitoring market developments closely in conjunction with HM Treasury and other central banks and would “take all necessary steps to meet its responsibilities for monetary and financial stability.”
The vote revealed deep divisions across Britain, with London and Scotland voting by large margins to stick with the European Union, while most towns, seaside resorts and rural England wanted to leave.
Richard Buxton, head of UK equities and chief executive of Old Mutual Global Investors, said the initial reaction in financial markets has shown, there is no merit in pretending that for investors and companies this is not, by some margin, the worst of the two possible outcomes of the referendum.
He said: “We had expected the result of the vote to be close, but our conviction was nevertheless that the status quo would prevail.
“The biggest sadness of today is that it is reasonable to assume that the UK will quickly enter a period of economic recession, the key reason why we believed the outcome would be different from what has materialised today.