Britain has voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow since World War Two to the European project of forging greater unity.
Global financial markets plunged on Friday as results from a referendum defied bookmakers’ odds to show a 52-48 per cent victory for the campaign to leave a bloc Britain joined more than 40 years ago. The pound fell as much as 10 per cent against the dollar to touch levels last seen in 1985, on fears the decision could hit investment in the world’s fifth-largest economy, threaten London’s role as a global financial capital and usher in months of political uncertainty. The euro slid three per cent.
The United Kingdom itself could now break apart, with the leader of Scotland — where nearly two thirds of voters wanted to stay in the EU — saying a new referendum on independence from the rest of Britain was “highly likely”.
On the continent, politicians reacted with dismay. German Chancellor Angela Merkel, who invited the French and Italian leaders to Berlin to discuss future steps, called it a watershed for European unification. Her foreign minister called it a sad day for Britain and Europe.
“It’s an explosive shock. At stake is the break-up pure and simple of the union,” French Prime Minister Manuel Valls said. “Now is the time to invent another Europe.” The result emboldened eurosceptics in member states, with French National Front leader Marine Le Pen and Dutch far-right leader Geert Wilders demanding their countries also hold referendums. Le Pen changed her Twitter profile picture to a Union Jack and declared “Victory for freedom!”
World stocks saw more than $2 trillion wiped off their value, with indices across Europe heading for their sharpest one-day drops ever. Britain’s big banks took a $100 billion battering, with Lloyds, Barclays and RBS falling as much as 30 per cent at one point.
An emotional Prime Minister Cameron, who led the “Remain” campaign to defeat, losing the gamble he took when he promised the referendum in 2013, said he would leave office by October. “The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction,” he said in a televised address outside his residence. “I do not think it would be right for me to be the captain that steers our country to its next destination,” he added, choking back tears before walking back through 10 Downing Street’s black door with his arm around his wife Samantha.
Quitting the EU could cost Britain access to the EU’s trade barrier-free single market and means it must seek new trade accords with countries around the world. A poll of economists by Reuters predicted Britain was likelier than not to fall into recession within a year.
Left unclear is the relationship Britain can negotiate with the EU once it leaves. To retain access to the single market, vital for its giant financial services sector, London may have to adopt all EU regulations without having a say in its shaping, contribute to Brussels’ coffers, and continue to allow free movement as Norway and Switzerland do — all things the Leave campaign vowed to end.
The EU for its part will be economically and politically damaged, facing the departure of a member with its biggest financial centre, a UN Security Council veto, a powerful Army and nuclear weapons.
The world’s biggest trading bloc — which rose out of the ashes of two world wars, fascist and communist totalitarianism to unite a continent of prosperous democracies — will lose around a sixth of its economic output.
The vote will trigger at least two years of divorce proceedings with the EU, the first exit by any member state. Mr Cameron, in office since 2010, said it would be up to his successor to formally start the exit process.
His Conservative Party rival Boris Johnson, the former London mayor who became the most recognisable face of the Leave camp, is now widely tipped to seek his job. Mr Johnson left his home to jeers from a crowd in the mainly pro-EU capital. He spoke to reporters at Leave campaign headquarters, taking no questions on his personal ambitions. “We can find our voice in the world again, a voice that is commensurate with the fifth-biggest economy on Earth,” he said.
Lawmakers from the Opposition Labour Party also launched a no-confidence motion to topple their leader, leftist Jeremy Corbyn, accused by opponents in the party of campaigning only tepidly for its Remain stance.
There was euphoria among Britain’s eurosceptic forces, claiming a victory over the political establishment, big business and foreign leaders, including US President Barack Obama who had urged Britain to stay in. “Let June 23 go down in our history as our independence day,” said Nigel Farage, leader of the eurosceptic UK Independence Party, describing the EU as “doomed” and “dying”.
The shock hits a European bloc already reeling from a eurozone debt crisis, unprecedented mass migration and confrontation with Russia over Ukraine. Anti-immigrant and anti-EU parties have been surging across the continent, loosening the grip of he establishment that has governed Europe for generations.
US Republican presidential candidate Donald Trump, whose own rise has been fuelled by similar anger at the political establishment, called the vote a “great thing”. Britons “took back control of their country”, he said in Scotland where he was opening a golf resort. He criticised Mr Obama for telling Britons how to vote, and drew a comparison with his own campaign. “I see a big parallel,” he said. “People want to take their country back.”
President Obama said he respected the UK vote to leave, and that the US’ relationship with Britain would endure. Britain has always been ambivalent about its relations with the rest of post-war Europe. A firm supporter of free trade, tearing down internal economic barriers and expanding the EU to take in ex-communist eastern states, it opted out of joining the euro single currency or the Schengen border-free zone.
Mr Cameron’s ruling Conservatives in particular have harboured a vocal anti-EU wing for generations, and it was partly to silence such figures that he called the referendum.
Back then it looked like a sure thing. But the 11th hour decision of Mr Johnson — Cameron’s schoolmate from Eton — to come down on the side of Leave gave the exit campaign a credible voice.
World leaders including Mr Obama, Ms Merkel, Chinese President Xi Jinping, Nato and Commonwealth governments had all urged a Remain vote, saying Britain would be stronger and more influential in the EU than outside.
The four-month campaign was among the most divisive ever waged in Britain, with accusations of lying and scare-mongering on both sides and rows over immigration which critics said at times unleashed overt racism.
At the darkest hour, a pro-EU member of Parliament was stabbed and shot to death in the street. The suspect later told a court his name was “Death to traitors, freedom for Britain”.
The campaign revealed deep splits in British society, with the pro-Brexit side drawing support from voters who felt left behind by globalisation and blamed EU immigration for low wages. Older voters backed Brexit; the young mainly wanted to stay in. London and Scotland supported the EU, but swathes of England that have not shared in the capital’s prosperity voted to leave.
Support for Remain among Scots prompted Scottish First Minister Nicola Sturgeon to declare it “democratically unacceptable” for Scotland to be dragged out of the EU against its will. “It is a statement of the obvious that the option of a second referendum must be on the table and it is on the table,” she said, two years after Scots voted to stay in the United Kingdom. “I think an independence referendum is now highly likely.”
The financial turmoil was the worst global shock since the 2008 economic crisis, and comes at a time when interest rates around the world are already at or near zero, leaving policymakers without the usual tools to respond. The body blow to global confidence could prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all major central banks, despite their limited options. The world’s main central banks offered financial backstops to soothe plunging markets.
The Bank of England offered to provide more than £250 billion ($347 billion) plus “substantial” access to foreign currency, and said it would consider more measures if needed. The European Central Bank, US Federal Reserve and People’s Bank of China also moved to reassure investors.
