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Britain Votes for Brexit; Repercussions for Brexit; Markerts Hit Hard by Brexit Vote. Aired 3-4a ET
Aired June 24, 2016 - 03:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(COMMERCIAL BREAK)
[03:00:00] RICHARD QUEST, CNN NEWSROOM SHOW HOST: A very good morning to you. It is 8 o'clock in the United Kingdom. Nine o'clock in Central Europe.
It is a historic morning whichever way you look at it. Britain and European politics -- excuse me, will not be the same, as the country wakes up to the decision the people have voted, to leave the European Union.
Good day to you. I'm Richard Quest.
HALA GORANI, CNN NEWSROOM SHOW CO-HOST: I'm Hala Gorani. Good morning. Eight a.m. Market should open in the next few seconds. We're here to bring you all the reaction from both Westminster and the world.
And also currency market where's the pound has taken an absolutely brutal beating. Twelve percent was the decline for the pound at one point. We're about 1.33 against the dollar after having started at 1.51 before the Brexit picture was becoming clear.
By the way, here's the FTSE, Richard. Very early.
QUEST: Yes.
GORANI: This is one minute in. I mean, it's going to get worse just based on the futures that we saw since 1948.
QUEST: The range and extent and detail of this decision is extraordinary. And to give you a taste of it, if I may. I'm just going to read you two or three of the wires briefly that have just come out.
For example, Poland's foreign minister says, he sees no immediate impact of Brexit for the Polish people who are living in the United Kingdom. Alex Salmon, the former First Minister of Scotland says, that the British Prime Minister David Cameron, quote, "must resign today. He has no choice. He must resign after losing the referendum."
Everybody, wherever we look, is -- even the Dutch prime minister, is saying that Britain -- Mark Rutte is saying regrets the British decision, but European cooperation will have to continue.
We even heard in the last 20 minutes from Donald Tusk, the president of the commission -- of the council, who says a historic moment but not a hysterical reaction.
GORANI: All right. We are determined to keep our unity as 27. But Donald Tusk has already switched to the union of 27 members, just a few hours after the official announcement that the U.K. has voted to leave the European Union.
QUEST: Not in short the president of the European Parliament says, "For 40 years, the U.K.'s relation with the E.U. was ambiguous. Now, it is clear. The will of the voters must be respected. Now needs speedy and clear exit negotiations." So, the parliament has the bit between the teeth.
GORANI: Nina dos Santos is on the trading floor in the City of London. For more reaction, she's live. We're seeing -- and you have a guest with you there. Tell us what the...
NINA DOS SANTOS, CNN CORRESPPONDENT: That's right.
GORANI: ... what the conversation is on the trading floor all about this morning.
DOS SANTOS: Well, the meetings, like the morning meetings that happens about 30 minutes before the markets open, have been basically dominated by one message, keep calm, keep clear, keep collected as your clients continue to call in.
And the moment the FTSE 100 started trading, we saw the phone lines were starting to ring hot at the moment. And as you can hear things are little bit calmer.
I'm standing here with Simon French, he's the chief economist here at Panmure Gordon in the City of London. Simon, FTSE 100 as we are just showing our viewers there, down about 1.5 percent, which is not what you would expect based on the fall you've seen in the pound overnight. But it seems like the volumes are so heavy. They strongly depend upon the price for this market.
SIMON FRENCH, PANMURE GORDON CHIEF ECONOMIST: That's right. Such as the magnitude has change on the currency overnight. And also on international voices as well. I think the FTSE in its very early minute of trading is struggling to price a lot of these assets. So, then we'll get a picture for maybe potentially the first half hour of how actually equities are pricing this first event.
DOS SANTOS: Do you think it could fully lead even further because if you're looking at pricing at 10 percent plunge in the pound, well, automatically the equity markets in Europe and in Britain should fall quite a bit further than this.
FRENCH: That's right. But it will be symmetrical. And of course, a lot of the FTSE isn't internationally diversified. And there will be brave investors will be coming into the market looking at some of the currency translation effects that will through from a weak Sterling, to keep those with heavy U.S. dollar revenues.
Looking for opportunities but probably only for the very, very brave at this stage because we simply don't know where the market will land.
DOS SANTOS: So, let's talk about what's going to happen now. Obviously market makers will be taking a look at the numbers those FTSE 100, FTSE 250 company they got a lot of their revenues from Europe reevaluating whether or not it will hold on those stocks.
[03:05:04] But they will also going to be looking to the Bank of England here, aren't they, for some kind of concerted policy push. People are starting from what I understand to price in about half a percent rate cut...
FRENCH: Yes.
DOS SANTOS: ... in the markets. But it's unlikely we're going to see that transpire immediate, right?
FRENCH: Yes. I think the Bank of England at least right now are under no pressure to change policy, right. I think they are very active behind the scenes in terms of liquidity whether liquidity blockages.
What we will look for longer-term as we get more of a position around the politics here in the U.K., is whether the (Inaudible) policy committee deem that they need to protect demand and therefore cut interest rates or they're worried about Sterling and inflation.
And the flip side they may need to raise interest rates. I think the bounce of probability is they will cut interest rates. And that's where markets are right now. But of course that intersects with fiscal policy and what the reaction of Eurozone leaders and the leaders here in the U.K.
DOS SANTOS: It's not just the U.K. markets. We got of the European markets down. We've got markets right around the world down. In fact, the only major currency that's depreciating against the U.S. dollar is the Japanese yen at the moment.
FRENCH: Yes.
DOS SANTOS: Is this a kind of Black Friday, Black Wednesday potential scenario? Is it looking base on the early indications not quite as bad as some people are expecting? Even if the result is so wildly different from what people like you yourself were expecting 10 hours ago.
FRENCH: Yes, I mean, you're absolutely right. You have to take a lot of people, myself included by surprise. But one of the things that differentiates today with Black Wednesday, previous time really, we place this parallel really, is we knew immediately once the banking gave up protecting that peg against the Dutch mark. We knew the environment.
One of the things that will be cautious for many investors this morning is that we don't know what article 50 will trigger into the timetable. We do more particularly...
(CROSSTALK) DOS SANTOS: Which is the article under these treaties, by which the U.K. would have to leave the European Union. And it would take two years to negotiate that.
I want to point out that the European market are falling quite a bit farther than the FTSE 100 as we're saying before because (Inaudible) is so heavy . The FTSE is a bit touch and go in terms of numbers in the first few minutes. The DAX is down by about 9 percent.
FRENCH: Yes.
DOS SANTOS: But the euro down. What do you make of these kind of figures? Because obviously we're talking about, I believe actually the FTSE 100 is down by 7 percent at the moment.
FRENCH: Yes.
DOS SANTOS: So, that's as you are affecting there.
(CROSSTALK)
FRENCH: And that's where we're getting, they're getting the pricing starting to come through, more reflective of where other (Inaudible).
DOS SANTOS: Sure. But the point is, is this also has a big ramification for continental Europe. And some people are saying, you on our show (AUDIO GAP)
QUEST: We have lost -- we lost Nina there just for the moment. Listening to what they were talking about, I think we do need to spend a moment or two, looking at the markets.
GORANI: Yes. Well, this is a really ugly picture across the board. The FTSE started down only slightly because investors were trying to price some of these equity assets. And now, look at it. The FTSE down 8.5 percent, just about. Look at the Xetra DAX index in Frankfurt. Almost 10 percent drop.
QUEST: Actually, I was seeing the -- this is kneejerk to some extent but it is quite serious in the DAX. And indeed the FTSE is now extending its losses beyond 8 percent and beyond. The pound down 9 percent, 8 to 9 percent to 1.36, 35, as we watch to see further details on that.
GORANI: All right. And the pound seems to have found sort of a level there, around 1.35, 1.36. It was lower at 1.33. What are you seeing?
QUEST: I'm just -- I'm seeing otherwise, I can't confirm it, but...
GORANI: OK.
QUEST: ... bear in mind...
GORANI: Well, we'll wait to confirm that one.
QUEST: Yes. GORANI: All right. What are we doing now? Christiane is at Westminster.
CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Yes, Hala and Richard, as you see the turmoil in the markets. They are voting with the downward arrows to the vote that the British people have taken.
And joining me now to discuss this and the way forward, is Sir William Cash, the conservative M.P. Brexiter and the chairman of the House European Scrutiny Committee in Parliament, and also Emma Hogan, who's the European correspondent for The Economist.
So, Sir William, you obviously -- it's a good day for you.
WILLIAM CASH, BRITISH PARLIAMENT MEMBER: Well, I've campaigned for this for 30 years. Yes.
AMANPOUR: OK. What do you make of the immediate commentary on what just happened in the markets?
CASH: Well, quite clearly, as far as the markets are concerned, there is a hit. But actually the question we have to ask ourselves is a longer-term question. And if you want to actually have democracy and you want to be able to govern yourselves as a country, and America understands this.
There's no chance for America and the United States, you would allow yourself to be governed by other countries or for that matter have your Supreme Court be overridden by another Supreme Court.
[03:10:06] This is a very, very important issue. Not really a principle. But a practical democracy, and therefore, yes, there are going to be consequences. But actually the truth is, just as my father, for example, is killed in the last war, fighting with Americans in Normandy, there are moments when you actually have to decide do you really want freedom and democracy? And what flows from that?
AMANPOUR: Can I just ask you, Emma?
EMMA HOGAN, THE ECONOMIST EUROPE CORRESPONDENT: Yes.
AMANPOUR: You know, I feel like I'm listening to a dictatorship being described. That there's no freedom. There's no democracy. There's no sovereignty. What are -- I mean, does that jive with reality? Obviously, there is a pull sovereignty to some extent, on big issues like climate and, you know, the whole free trade and single market. But how do you see it? I know The Economist obviously is a remainder.
HOGAN: Absolutely. I mean, the way that we have seen it, is that Britain had best of both worlds. Right? And that it was part of the E.U., it was part of the free trade agreement but it was not part of the Schengen passport free zone, it was not part of the euro especially Britain had already quite as sort of stepped back from the E.U. This is taking it quite a lot further back. And it will make getting
trade deals even harder. I don't think the E.U. is going to be friendly towards Britain right now. I think that when it is Article 50 of less than city is invoked, then it's going to be a long, long haul of negotiations which Britain is not part of.
Britain will be out of the Brit. So, it's like having a divorce where one person is there with the lawyer and the other person is out of it. So, if Article 50 gets invoked, then I think we will -- we will be punished for this, in a sense.
CASH: Can I make a comment on this, if I may? You see, yes, we're out of the euro. But don't forget that it was all the people who said that we should join the euro and also proposed the exchange rate mechanism which caused a hit something like this back in...
(CROSSTALK)
AMANPOUR: But if I'm not mistaken it was Prime Minister Gordon Brown who said no to the euro. An elected British leader...
CASH: Yes.
AMANPOUR: ... who said no to the euro.
CASH: Yes, of course.
AMANPOUR: But I want to ask you is to react to Donald Tusk, the E.U. President, who moments ago came out and said we obviously are going to continue with our vision of unity for Europe.
CASH: Yes, of course.
AMANPOUR: But more importantly, he said about Great Britain, he said, look, there will be no legal vacuum. Until the U.K. formally leaves, all E.U. laws and rights and all the rest will remain. So, you're going to have to deal with that.
CASH: Well, that falls -- look, that falls exactly within my constitutional duties in the House of Commons. The position is this it's a technical about Article 50, the treaty, the fact is...
AMANPOUR: That's invoking the divorce clause.
CASH: That's invoking the divorce clause, as you put it. Actually what that divorce clause, which is done under the existing treaties, which have just been voted against by the British people, actually says is subject with the consent of the European Parliament.
It's organized on the bases of qualified majority. So, in other words, it operates on the basis of you are literally bound hand and foot, when you're in those negotiations.
So, the question which is currently being discussed is the issue of whether or not we can repeal the European Communities act, which is the bases of all of these laws flood into the United Kingdom. And then look at whether or not Article 50 is the right way to go
about it. And all we're saying these decisions...
(CROSSTALK)
AMANPOUR: So, you sounds like you want U.K. too to leave.
CASH: Well, no.
AMANPOUR: But that they can choose when and how you can.
CASH: Not, no. No, I'm not. I'm saying that we are going to repeal the European Communities Act because that is what this decision says. However, in order to do it in an orderly manner, and by the way as chairman, I'm already get talking to the other national chairman of all the Parliament committees of all the 27 members states, of the 27 member states.
And I have assured them, that we will be doing it in an orderly manner. But actually it does require following certain prescribed routes.
AMANPOUR: OK. And one of those is to repeal the act and then do things in an orderly way so that we can regain the stability that is needed.
AMANPOUR: I am absolutely sure that that's in your interest.
CASH: And that's their interest too.
AMANPOUR: But we've heard from Europe -- we've heard from European leaders, that of course they're not going to be vindictive or hysterical.
CASH: No.
AMANPOUR: But they do not want to make it easy. And Phillip Hammond, the foreign secretary has actually been in the news meetings over and over again. As foreign secretary who said, he does not believe that Britain is suddenly going to be treated as, you know, open arms, as it leaves the E.U.
CASH: Yes. Well, OK, fine, yes.
AMANPOUR: So, can we just move on to Emma for the moment. Because regarding the economic aspect of this, the economists wrote that leaders are peddling an illusion, which on contact with the reality of Brexit will mean that pound will fall apart.
If Britain leaves the E.U. it's likely to end up poorer, less open, less innovative and far from reclaiming the global outlook that you say you want.
CASH: Yes.
AMANPOUR: It will become less influential and more parochial. I have to say, that that is what the foreign secretary said, as well. It's a difficult thing for the foreign secretary of the country to admit that and he did openly.
[03:14:58] HOGAN: Yes. Because it depends on what deal Britain gets in the end. So, if it gets a deal like Norway, it was still have to accept act freedom of movement so that those who like to believe be annoyed.
AMANPOUR: Do you want the Norway solution?
CASH: The exact mobile, the Norway solution is not necessarily the best one in itself nor is the Swiss one. This is a -- this is something that is going to have to be...
(CROSSTALK)
HOGAN: OK. We may not be able to pick and choose. But this is the thing.
CASH: Yes. No, but...
AMANPOUR: All right. I have to wrap. I'm sorry. I have to wrap. I'm being told to go back to the studio.
CASH: All right.
AMANPOUR: So, William Cash...
CASH: OK.
AMANPOUR: ... Emma Hogan, thank you very much indeed. Back to you.
GORANI: The Downing Street, we're expecting David Cameron, the Prime Minister, to make a statement. Max, over to you.
MAX FOSTER, CNN CORRESPONDENT: Jim has come out so we can assume he's about to come out. A lot of questions about what he's going to say. Initially, we thought that he was going to come out and just to reassure the markets.
The markets already opened. They're pretty much crashing. That may be an exaggeration. But they're plummeting. So, now, the speculation is that he's going to come out and resign. We just don't know, it does depend on his conversion he's had with Boris Johnson and others in the leave campaign.
But he is coming out after the markets have open. The damage has been done. There's not much bail to bring that back up. So, now the speculation is that he is going to resign. So, there's a podium. A huge moment in his career. A defining moment in his career. Possibly the defining moment in his career.
Because it was David Cameron that started this whole thing off. His partly was split. Pro-Europeans, anti-European. He wanted to resolve that by letting the British people decide what was going to happen and they had that referendum.
He was at the front of the campaign for Britain to stay within the European Union and he's lost. So his position is untenable in the long term. It's just whether or not how he decides to go right now.
GORANI: But regardless of what he says right now, there is going to have to be a profound rethink of how the government of David Cameron now is going to have to deal with the new reality, that it basically has given itself two years to negotiate the U.K.'s exit from the E.U. I mean, this is just going to be extremely complicated, no matter how you look at it and no matter what side you're on.
FOSTER: I mean, where do you even begin? You've got the diplomats that have to sign negotiations with Brussels. You have all of the laws that were linked to European laws, have to be all unraveled. You got all sorts of connections. And you've this whole regional independence thing bubbling up again.
The Scottish First Minister saying that Scotland has clearly voted that they want to be in the European Union. And indication that the independence movement is surging up again there.
You've got the leader of the Sinn Fein Party of Northern Ireland calling for referendum on Irish unification, as well. SO, you could potentially see the breakup of the U.K., not just the E.U. And its having financial market impacts, as well.
I will just note though, Hala, that Michael Gove, he's a leader on the leave side, did point out before all this happens that it's up to Britain to spark the Lisbon Treaty process. About two-year process you're referring to there.
And if we're looking for stability, certainly the government, whoever is leading it will want to be ready to go into that Lisbon Treaty process, that two-year process before it's started. So, not necessarily two years from today. But certainly that's what we're looking at this point.
You just imagine the pressure on David Cameron, who many have said had a lucky career. Now, he's going to be out to be defined by this moment. And it's about to happen unfold here in Downing Street. The door is opening let's just check to see if that's him. Here he is, David Cameron and Samantha Cameron. I'll let him do the speaking.
DAVID CAMERON, BRITISH PRIME MINISTER: Good morning, everyone. The country has just taken part in a giant democratic exercise, perhaps the biggest in our history. Over 33 million people from England, Scotland, Wales, Northern Ireland and Gibraltar have all had their say.
We should be proud of the fact that in these islands we trust the people with this big decisions. We not have a parliamentary democracy, but on questions about the arrangements for how we're governed. There are times when it is right to ask the people themselves. And that is what we have done.
The British people have voted to leave the European Union and their will must be respected. I want to thank everyone who took part in the campaign on my side of the argument. Including all those who put -- put aside party differences to speak in what they believed was the national interest.
And let me congratulate all those who took part in the leave campaign, for the spirited and passionate case that they made.
The will of the British people is an instruction that must be delivered. It was not a decision that was taken lightly. Not least because so many things were said by so many different organizations about the significance of this decision.
[03:20:11] So, there can be no doubt about the result. Across the world, people have been watching the choice that Britain has made. I would reassure those markets and investors that Britain's economy is fundamentally strong.
And I would also reassure Brits living in European countries and European citizens living here, that there will be no immediate changes in your circumstances. There will be no initial change in the way our people can travel, in the way our goods can move, or the way our services can be sold.
We must now prepare for a negotiation with the European Union. This will need to involve the full engagement of the Scottish, Welsh and Northern Ireland governments, to ensure that the interests of all parts of our United Kingdom are protected and advanced.
But above all, this will require strong, determined and committed leadership. I'm very proud and very honored to have been Prime Minister of this country for six years. I believe we've made great steps, with more people in work than ever before in our history, with reforms to welfare and education.
Increasing people's life chances, building a bigger and stronger society. Keeping our promises to the poorest people in the world. And enabling those who love each other to get married whatever their sexuality.
But above all, restoring Britain's economic strength. And I'm grateful to everyone who has helped to make that happen. I've also always believe that we have to confront big decisions, not duck them. That is why we delivered the first coalition government in 70 years, to bring our economy back from the brink.
It's why we delivered a fair, legal and decisive referendum in Scotland. And it's why I made a pledge to renegotiate Britain's position in the European Union and to hold a referendum on our membership and have carried those things out.
I fought this campaign in the only way I know how, which is to say directly and passionately, what I think and feel, head, heart and soul. I held nothing back. I was absolutely clear about my belief that Britain is stronger, safer and better off inside the European Union.
And I made clear the referendum was about this and this alone. Not the future of any single politician including myself. But the British people have made a very clear decision to take a different path. And as such, I think the country requires fresh leadership to take it in this direction.
I will do everything I can as Prime Minister to steady the ship over the coming weeks and months. But I do not think it would be right for me to try to be the captain to steers our country to its next destination. This is not a decision I've taken lightly. But I do believe it's in the national interest to have a period of stability, and then the new leadership required.
There is no need for a precise timetable today. But in my view we should aim to have a new Prime Minister in place, by the start of the Conservative Party conference in October. Delivering stability will be important. And I will continue in post as Prime Minister, with my cabinet for the next three months.
The cabinet will meet on Monday. The government of the Bank of England is making a statement about the steps what the bank and the treasury are taking to reassure financial markets.
We will also continue taking forward the important legislation that we set before Parliament in the queen's speech. And I have spoken to her majesty, the queen this morning, to advise her of the steps that I'm taking.
A negotiation with the European Union will need to begin under a new Prime Minister. And I think it's right that this new prime minister takes the decision about when to trigger Article 50 and start the formal and legal process of leaving the E.U.
I will attend the European Council next week to explain the decision the British people have taken, and my own decision. The British people have made a choice. That not only needs to be respected, but those on the losing side of the argument, myself included, should help to make it work.
Britain is a special country. We have so many great advantages. A parliamentary democracy, where we resolve great issues about our future through peaceful debate. A great trading nation with our science and arts, our engineering and our creativity respected the world over.
[03:25:04] And while we are not perfect, I do believe we can be a model of a multiracial multiphase democracy, where people can common make a contribution and rise to the very highest that there talent allows.
Although leaving Europe was not the path I recommended, I am the first to praise our incredible strengths. I said before that Britain can survive outside the European Union. And indeed that we could find a way.
Now the decision has been made to leave, we need to find the best way. And I will do everything I can to help. I love this country and I feel honored to have served it. And I will do everything I can in future to help this great country succeed. Thank you very much.
FOSTER: There you have it. David Cameron is resigning. He is going to be in power for the next three months. He has fallen on his sword. An extraordinary moment in British politics. But it also has international repercussions.
We've seen the financial markets, the massive fallout this morning just in the first hour of trading. David Cameron very clearly stating this referendum was his idea. He gave it his full backing in that campaign for Britain to stay within the European Union.
He said he did all that he could and ultimately, he lost that side of the argument. And he had no option but to step down. So, he will be in power for the next three months. We can assume he will be going up for the road to the Buckingham Palace today to speak to the queen. I know that she is in town ready to handle a situation like this.
But an extraordinary moment here in London as David Cameron, the Prime Minister, steps down. It seems like just a couple of years ago that I was here reporting on when he came into Downing Street. It was in the dark then. It's bright sunshine now.
And I have to say, just to describe what it's like to be here in the U.K. here at the moment. This is pretty extraordinary. And unbelievable moment. Because people knew that this was a possibility. But so many people just didn't really see the reality.
And now, this process will unfold for Britain to extricate itself from the European Union. And no one really knows how it's going to work. A timetable needs to be set put. But what does it mean? What does it mean to politics? What does it mean to the economy? What does it mean to the international economy? What does it mean for an ordinary Brits and also ordinary Europeans?
On note that the stock exchange in Germany is down more than the Britain one today. So, certainly a big story there. Christiane Amanpour is just down the road. Christiane, I mean, how do you put this into context?
AMANPOUR: Well, you know, Max, just like you, you were there, you said watching him become Prime Minister, we covered the election not so long ago, wasn't it? One year ago, just about, where he delivered a resounding, overwhelming election victory for the Conservative Party.
People didn't think he would. He didn't think he would. He thought maybe that he would have to go into coalition again. But it was a resounding victory for Prime Minister David Cameron leading his party to an overwhelming victory. He didn't need to go into coalition.
But, but, two years before that, fearing that he might not win this overwhelming victory, he promised the country a referendum. Having had Nigel Farage, and U.K. nipping it in its heels, pushing him on his right flag, you know, demanding this kind of thing, he then decided to go for it.
Many people believed he shouldn't have done it. And today he's come out and said that, you know, he did everything he could to push for the solution that he thought would be best for Britain. And that would be to remain strong in a strong Europe. He did come out and say, though, that he believes that Britain's
economy is fundamentally strong. And that he wants to calm the markets. But he said, you know, with these big decisions, you have to confront them and you can't duck them. And he said that he would stay on for a period of time. he saif, at least up until October, the next Conservative Party conference, when a new prime minister should be chosen.
And that new prime minister should start the negotiations with European and invoke the divorce clause in this decision, which is called Article 50 of this particular E.U. regulation.
So, Max, it is an extraordinary moment, of course. Prime Minister Cameron have said over and over again. And so, with all his colleagues that he would stay come what may despite whatever the vote was. But there were a few people who said that it would never be possible. And so, that's what we're seeing today. Max?
FOSTER: OK. Christiane, I just want to ask you about the wider sort of fallout here in London at least. We can assume, can't we, that George Osborne's position is now seen as untenable as well.
[03:30:03] The finance minister maybe likely to go. The leader of the Labour Party, Jeremy Corbyn, he may be likely to go, as well. Because he was behind the same campaign that David Cameron was in and he seem to handle it even worse.
And then we got the situation about who does replace David Cameron. And you know, you got Boris Johnson, Michael Gove. They'll be talking presumably behind the scenes as we speak to look at a transition. Obviously the Conservative Party will decide that. But is it going to be Prime Boris Johnson do you think by October?
AMANPOUR: You know, it's really very difficult to tell. I mean, it's clear that both the Prime Minister and many believe that Boris Johnson took this leave position in order to challenge for the party leadership. And in some way, or fashion of course, he had to win the vote and they have won the vote.
But to be -- to be the, you know, the answer to the grassroots of the Conservative Party, I'm going to turn now to Lady Barbara Judge, he's the chairman -- chairwoman of the International Institute of Directors, the Institute of Directors.
Welcome to the program. You've been watching this incredibly closely. Were you surprised that the Prime Minister announced that we could not stay for the long haul?
BARBARA JUDGE, INTERNATIONAL INSTITURE OF DIRECTORS CHAIRWOMAN: I was surprised. I though he brought the referendum to the people. He said he would stand by it. And he wouldn't want to give up the opportunity to try to make it work.
I think -- I am surprised. And I think the country needs to pull together. Maybe he believes that the reason that he is resigning is in order to have a time of reconciliation. Reconciliation, among all of the groups because it's not the time for recrimination.
Britain has to be resilient. They have to deal with the rest of the world. And in some degree they're on their own. So, they need leadership in order to do that.
AMANPOUR: Now viewed from a purely economic and financial perspective, you know, we've seen what the market and the pound have been doing and it's catastrophic this morning. He said, the Prime Minister that this is a strong economy and he wants to reassure the markets. How do you see that playing out?
JUDGE: Well, I so think British business is strong even before the referendum. And we were looking at the entire E.U. Britain has one of the most extraordinary economies in Europe. And one of the strongest economies in the world. We're still here.
We're still a very good business and we've been a trading nation for our whole existence. Britain has been powerful even though it's a small island over many centuries.
I've lived in Europe. I've lived in Asia. I've lived in America. Everywhere, Britain is respected. We have to take the respect, we have to be resilient and we have to together as a group of business people in order to confront the world now. Because we need partnerships. We need them more than ever.
AMANPOUR: And how does -- how do you get those partnerships? Because everybody, all of the experts have said it's going to take an incredibly long time to regain a market as big and as powerful as the single market.
JUDGE: Well, we have Asia. There's a huge market in Asia. We have America. The America has this huge market and we have it.
AMANPOUR: But you heard what President Obama said. That back of the line.
(CROSSTALK)
JUDGE: Back of the queue. He did say that. But you know what? Politician say one thing when they are on the side to win. And another thing when they have to confront losing. It was in America's interest and in America's belief that Britain should stay in the European Union. But we're not there.
And if we're not there America has to deal with the new reality. The thing that worries me a little bit, is that what does this mean about Trump? What does this mean about the same -- is it the same people in Britain or the people that are going to vote for Trump? I don't know that. I wonder where Marine Le Pen is today.
AMANPOUR: Well, we know where she is because Marine Le Pen has called for a referendum for France, And actually, this is why the world was looking at this vote, not just for the actual result that would come out. But what it would say about these populous nationalist movements that are now finding strength that they never had in recent memory. What would that do to the financial world? To the global economy?
Because I've heard, that even bankers are concerned about the political reality, about nationalism. About, you know, protectionism. All this political turmoil, that's in that direction.
JUDGE: Well, I think the financial markets as you can see are not taking it well. And we never expected them to take it well. I think the shock of it is one of the things that's driving the markets down.
In the next few weeks, the Bank of England has to do what it said it would, try to preserve stability. The Fed has to deal with the issues are going to in America. I think people have to come together and say we have a problem, we have a lot of resources in terms of brain power and economic, we have to get together to solve it.
America is not going to let Britain down at this moment. Obama is still President. America and Britain has had a special relationship. I believe there will be time for a lot of conversations, a lot of phone calls, to say, all right, here we are. Let's try to get together. There is a new reality. But we must be resilient. If we aren't there's a bigger danger ahead. A big amount of danger.
[03:35:03] AMANPOUR: Well, in that note, Lady Barbara Judge, chairman of the Institute of Directories. Thank you so much. And we are going to go straight back to you.
GORANI: All right. There you go. Extremely significant news. A political casualty, and the top political casualty, David Cameron, says he will eventually step down. And that a new prime minister, Richard, just updating our viewers, should be in place by the Conservative Party conference in October.
QUEST: Right.
GORANI: So, this was not necessarily expected so soon. But he is acknowledging that he is not the man to lead the Britain through this transition.
QUEST: He said, we will need strong, determined, committed leadership to go into the negotiations with the 27 remaining members of the European Union. He said he will stay to steady the ship. But it is not right to be the captain to the next destination.
He didn't give a timeline but he did says that the new prime minister should be in place by the start of the Tory Party conference which will be in October. Now that means he basically, the jockeying starts 10 minutes ago.
(CROSSTALK)
GORANI: Yesterday. But listen, here's the other thing, the other message before we get to Max who was at 10 Downing Street...
QUEST: Yes.
GORANI: ... who witnessed this historic moment. He wanted to reassure markets that Britain business is strong. That the markets are strong. But also that there are about a million, correct me if I'm wrong, Brits living in the E.U.
QUEST: And he basically said...
(CROSSTALK)
GORANI: And he said, that's not going to -- don't worry.
QUEST: His exact words were, there will be no change.
GORANI: No immediate change.
QUEST: No immediate change. Those people who are living overseas, there will be no change to their status in those other countries and no change or status for those E.U. citizens who are living in the United Kingdom.
The core of what he said, though, which resonated with me, the people have voted to leave. "And their will must be respected," is what he said. Under a new P.M., we should make help it what the choice people have made where you need to make it work.
GORANI: All right. But this might just be the defining moment of David Cameron's career. Not one he would have chosen for sure.
QUEST: The man has brought down the House around his own head.
GORANI: Yes. Let's get to Max Foster who's at 10 Downing Street. Let's talk a little bit about going forward. Who the most, you know, likely talked about candidate are for David Cameron's job, Max.
FOSTER: It would have been George Osborne, he's the number two. But he was on the same side as David Cameron, so he can't really step into that role. He can't imagine that he would. You would expect him to resign today. Anything is possible. I mean, I can't predict anything today. It's happening so fast. It's incredible.
The people we need to hear from are the people that are steering the ship right now. They are Boris Johnson, Michael Gove. And Gisela Stuart, as well. They were the three really front people of the leave campaign. And we haven't heard from them yet.
So, we need those speeches. What are their plans now because the Tory Party will be looking to them for leadership at this point in the run- up to the conference at the end of September, beginning of October when David Cameron will step down.
There will be a little campaigning right now. So, those three as well, need to decide who is going to go for the top job. You know, assume it would be one of them.
An extraordinary few months here in the United Kingdom. It's quite hard to get your head around. But this instability is palpable. Not just in the financial markets but people have had to question what it means to be British throughout this process. And there's a big divide in the country and it's not down the middle.
You got the situation where Scotland and London very strongly felt that they should remain in the European Union. And other parts of England in Wales, for example, Northern England into particular, very fiercely wanted to pull out of the European Union.
So, were they doing that because they didn't believe in the European Union? Or did they have wider grievances? Did they have an anti- establishment feeling? Did they feel disenfranchise society?
It does seem as though, according to the law of the research coming out from the academics that those voting to leave the European Union they weren't as well educated or have as much education, if I can call it that those who wanted to remain.
So, there's a lot of analysis in this speech on as to why people chose this route, who chose it? And how Britain can define itself moving forward and come to terms with this massive decision.
And the fact that David Cameron, the Prime Minister, has left, is unsettling itself. So, it was a huge moment for him not just for him but for the country.
QUEST: Max Foster, who is in Downing Street, we'll get you more reaction from European leaders at the moment. Apparently from...
(CROSSTALK)
GORANI: Here it is, yes.
QUEST: You have the details?
[03:39:59] GORANI: One moment. Yes. Francois Hollande. We heard from the foreign minister of France, Jean-Marc Ayrault. Now this Francois Hollande, France's President spoke with the German Chancellor, Angela Merkel this morning after the referendum results.
That's it. We know he's -- we're expecting a statement soon. That's all we know. So, but certainly, one can imagine that that was a conversation of capital importance.
QUEST: The acting director general of the British Chamber of Commerce is Adam Marshall, he joins me now. Mr. Marshal, not to result that you wanted or that your members wanted. You're going to have to live with it now. How difficult is it going to be?
ADAM MARSHALL, BRITISH CHAMBER OF COMMERCE ACTING DIRECTOR GENERAL: On the contrary, we remained very strictly neutral throughout the referendum debate. Because actually local business communities up and down the U.K. have got very different views on this particular subject.
And we saw an intense amount of variation there. I think what all of them were dismayed with, though, was the tone of the campaign. And they want to get -- and they want on that. QUEST: Right. So, that's over with. That's over with. Now, a
negotiation -- now, Britain, your members have to do business with uncertainty. Not only of now of a prime ministerial change, but also several years when we don't know the trading environment for the E.U./U.K. relationship.
MARSHALL: And that's absolutely right. And I think we need to see some steps taken to try to reduce that uncertainty wherever possible. You need the government and the Bank of England looking to reassure business, looking to reassure markets.
Take those decisions which are in Westminster gift, things like airports, runways, which we talked about for a long time. Investment in energy, broadband, et cetera. Those things do reassure businesses and their confidence during this period.
But businesses in Britain they are pretty resilient, they are plucky and they are pragmatic. So, quite a lot of firms will simply continue trading and adapt to this new environment. That can get lost today as we enter into the post-mortem of this referendum today.
QUEST: The -- I was looking for the exact quote, but the CEO of Aston Martin, Adam Parsons, have said this morning that basically what needs to happen, now is British business needs to make sure it is the most competitive it can be. And it needs to be the most productive it can be, just so it could withstand any terrorists that Europe might impose in the future.
MARSHALL: Well, I think that that's absolutely right. Given that we will find ourselves both in a period of uncertainty, and in a changed trading relationship. All of us in business need to hone both our teams. Make sure that we are investing appropriately and work to build our competitiveness as well. That goes just as much for small firms and it does for large ones, who also face different trading conditions.
GORANI: But do you -- do you believe that the -- this decision by British voters will invariably hurt the U.K.? I mean, to what extent would it hurt the U.K. The economy or do you think the U.K. economy can withstand this and suffer -- and suffer at all?
MARSHALL: Well, we have to realize that there's some fundamentally strong things in the U.K. economy that we can rely. We've got a strong record on employment, we've got strong record in very recent investment, as well.
But, but, this period of uncertainty is going to cause some businesses quite a great deal of difficulty. Others are saying I might put off some decisions and that's why we're saying to ministers here in Westminster, they need to look to measures that can boost confidence at this certain times.
GORANI: OK.
MARSHALL: It's like infrastructure investment. GORANI: Yes.
MARSHALL: Which they can't proceed with without Brussels.
(CROSSTALK)
GORANI: Government spending. But that's not very popular right now.
MARSHALL: Well, you know, there is a case for looking again the government fiscal rules. Now because they have to going to support the economy over that period uncertainty.
QUEST: You see the pound is down some 69 percent this morning. It may bounce back. It may not in the short term. That should help exports. But as you know better than anybody, it's a double edge sort.
MARSHALL: Indeed.
QUEST: Because imports become much more expensive for manufactured goods. So, how would you be advising your members to handle the fact that their principal currency has just fallen off a cliff?
MARSHALL: Well, it depends on the type of business that's concerned. For many of our exporting businesses, they're also significant importers because they're part of global value change, so they'll face both edges of that double-edge sword in the next few months. And we'll be looking for ways to adapt to that.
For those businesses that trade wholly in the U.K., the effects might be a little longer in coming. I think we have to advise everyone at this stage of the game to sit tight, look at what happens over the next few days and watch the situation. This isn't really looking to fast.
(CROSSTALK)
GORANI: What's do they looking out for. You say look out for the next few days.
MARSHALL: They need to be looking to see where Sterling stabilizes, for example.
GORANI: Right.
MARSHALL: We need to look at what sort of measures that Bank of England and the government puts in place as well to help companies and help to reassure confidence.
I think those sorts of things will be very important and what you'd hope for is that even if the prime minister has gone and is going to be gone by October, that the government has the strength to make some of those tough decisions because businesses are looking for that in the weeks ahead.
[03:45:04] GORANI: Yes.
QUEST: Do you have a preference on who you would like to see as the next prime minister?
MARSHALL: Absolutely none. We will await that political contest with interest.
QUEST: Right. Why would you just pause and think. That is worth a try. And we are waiting for Mark Carney, the Governor for the Bank of England who is going to speak. The governor, well, he's putting the microphones out already.
The bank has already said it will take all necessary steps to meet its responsibilities from monetary and financial stability. But I'm guessing, and you want him more from Governor Carney.
MARSHALL: We will be interested in what the governor has to say. What I think a lot of companies will be looking for in addition to currency stability is also the question about the availability of capital.
We've seen obviously banks shares slide in very significantly this morning. And a lot of firms will be asking us over the coming days, will we be able to get the capital we need when we need to. Take an expansion plan forward to when we need to look to enter into a new market overseas. And steps by the bank to give those reassurance are going to be hugely important. And it's also up to businesses we'll not to panic.
QUEST: OK. But I'll just going to go through some FTSE components for you. Barclay's Bank, roughly 23 percent down. Barracks development, which of course is a home builder, down 27 percent this morning. Obviously, they're being clobbered. Capital, we obviously -- and now we have the governor of Bank of England coming out.
MARK CARNEY, BANK OF ENGLAND GOVERNOR: The people of the United Kingdom have voted to leave the European Union. Inevitably, there will be a period of uncertainty and adjustment following this result. But as the prime minister said just this morning, there will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold.
And it will take time for the United Kingdom to establish new relationships with Europe and the rest of the world. So, some market and economic volatility can be expected as this process unfolds. But we are well prepared for this.
Her majesty's treasury and the Bank of England, have engage in extensive contingency planning, and the chancellor and I have remain in close contact, including through the night and this morning.
To be clear, the Bank of England will not hesitate to take additional measures, as required, as markets adjust and as the U.K. economy moves forward. Those economic adjustments will be supported by a resilient U.K. financial system, one that the Bank of England has consistently strengthened over the course of the last seven years.
The capital requirements of our largest banks are now 10 times higher than before the financial crisis. And the Bank of England has stress tested those banks against scenarios far more severe than our country currently faces.
As a result of these actions, U.K. banks have raised over 130 billion pounds of new capital. And have more than 600 billion pounds of high- quality liquid assets. So, what is this matter?
Well, that substantial capital and huge liquidity gives banks the flexibility they need to continue to lend to U.K. businesses and households even during the challenging times.
Moreover, as a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than 250 billion pounds of additional funds through its normal market operations.
The Bank of England is also able to provide substantial liquidity in foreign currency if required. And we expect institutions to draw on this funding, if and when appropriate. Just as we expect them to draw on their own resources as needed in order to provide credit, to support markets and to provide other financial services to the real economy.
In the coming weeks, the bank will assess economic conditions. And we will consider any additional policy responses.
A few months ago, the bank judged that the risk around the referendum were the most significant near-term domestic to financial stability. To mitigate them, the bank has put in place extensive contingency plans. And these plans begin with ensuring that the core of our financial system is well-capitalized, is liquid and is strong.
This resilience is backed up by the Bank of England's liquidity facilities in sterling and foreign currencies. And all of these resources will support orderly market functioning in the face of any short-term volatility.
The bank will continue to consult and cooperate with all relevant domestic and international authorities, to ensure that the U.K. financial system can absorb any stresses and can do its job of concentrating on serving the real economy.
[03:50:08] That economy will adjust to new trading relationships that will be put in place overtime. And it's these public and private decisions, which will determine the U.K.'s long-term economic prospects.
The best contribution of the Bank of England, the best contribution we can make to this process, is to continue to pursue relentlessly, our responsibilities for monetary and financial stability. These are unchanged.
And we've taken all of the necessary step to prepare for today's events. And in the future, we will not hesitate to take any additional measures required, to meet our responsibilities as the United Kingdom moves forward. Thank you very much.
QUEST: Unique. Unique environment, this morning. I can't remember the Governor of the bank of England ever making a statement in such a fashion. He said, we're well prepared for it. We've have extensive planning for this, we will not hesitate to take additional measures as necessary.
He said that twice. And there will be a period of uncertainty, what he described as economic market volatility. But what I heard there, Hala, and Adam, you're here with me, as well. What I heard there is we are going to flood the market.
GORANI: Well, he mentioned 250 billion pounds. Foreign currency also available in case it's needed. There's going to be no -- this is what Mark Carney is saying, there's going to be no crunch here.
QUEST: Yes. Not the big...
(CROSSTALK)
GORANI: We're here -- we're here to inject as much money as its needed. He's trying to reassure markets. And the question is going to be whether or not that works. Also, the other thing important, he is saying, look, banks have, what, 10 times higher liquidity than in 2008, which means we're not going to be stuck in a situation where they're not going t be able to lend. And therefore, you know, consumer spending will suffer.
QUEST: Do you have confidence in what you heard from the bank?
MARSHALL: Well, you know, there's a clear demarcation between where we were in 2008 and where we are today. That's the first thing that will give many businesses a real great deal of confidence.
He talked repeatedly, Mark Carney, did about the real economy. Those are the types of business I have in Chamber of Commerce and their membership up and down the U.K. What they were looking for were questions about liquidity, were questions about access to capital and were questions about shoring up the currency markets.
And all three of those areas were addressed in that short statement. And I think business will be watching the continued action of the bank over the weeks to come to see that that is followed through. Because that will give them some important sources of confidence.
QUEST: And let's not mistaken, Hala.
GORANI: Yes.
QUEST: The pound has just put on about 2 cents, it's 1.38. We're around 1.36 when the governor started to speak. Now, it seems to be at 1.38.
GORANI: So, banking shares, Barclay's were down about 30 percent at the open, just about. It's now down -- it's now bounced back up from that level. It's now lower by 21 percent.
QUEST: Lloyd's Banking Group is off 23 percent. Nina dos Santos is at the trading floor with the reaction of what people there may of what they heard from the Governor of the Bank of England. DOS SANTOS: Yes, Richard, well, a lot of people here were saying,
look, we're just waiting to see what the Bank of England Governor has to say. Because anything that he says at this point is likely to be positive. As you can hear, just behind me the trader is talking about the banks being down by quite a lot.
And the banks will be the main beneficiaries of what Mark Carney has been saying. That today you just reiterated yourself, Hala and Richard, 250 billion pounds, so that's about $370 billion there of liquidity in both pounds and foreign currency and of the banks as when they need it.
So, they can call upon these extra funds if they need it. And right throughout the course of the morning, what we've also seen is big banks like Barclay's, HSBC, Lloyd's, companies who shares are being pummeled down to the tune of about 20 percent, before Mark Carney started speaking.
It pains to reassure the markets before they open up. Putting statements saying that we've been thinking about this. We have our contingency plans in place, we've been shoring up our capital for quite some time.
Now FTSE 100 the last time we look so that was currently trading a little bit higher since Mark Carney's intervention there are about 4.7 of 5 of 1 percent down. That it still half of what it was when it opened down in excess of 8 to 7 percent. But for a long time people are going to be looking at the British pound, they are going to looking at these European stocks, as well.
Because remember, that the trading relationship between the E.U. and the U.K. is the biggest trading partners for each side will also come into question as the U.K. continues to negotiate its way out of this.
Now there is one thing I should point out that people are potentially pricing in here in the markets from the Bank of England. And we didn't hear any sign of that from mark Carney just a moment ago.
[03:55:05] And that is a potential interest rate cut. People were saying earlier on today and a lot of analyst notes that were coming to my inbox that they were pricing in around about half of 1 percent.
Now remember that interest rates in this country stand at a record low of already half of 1 percent. That could mean it could bring interest rates to rock bottom level basically zero. And they haven't ruled if the markets were to fall more than this. Potentially quantum of easing.
So, monetary stimulus from the Bank of England. And also potentially even fiscal stimulus from the U.K. treasury. Although you remember, George Osborne's future also potentially hangs in the balance now that his boss, David Cameron has resigned an hour ago, Richard and Hala.
QUEST: Yes. Thank you, Nina de Santos. We're seeing lots of share obviously the market has been sold en masse, Adam. So, you know, you're seeing things down 10 percent. One standout, what a surprise. Randgold Resources is up 18 percent.
GORANI: And what are -- sorry, what business are they at?
QUEST: Gold.
GORANI: OK. Well, that makes Randgold. Well, gold is always that refuge investment, isn't it, when people sort of semi-panic on the markets. And we're seeing this. And you can -- I think you can say a 30 percent decline in a share of prices. A bit of panicky. Same like Safeway, it's a supermarket for our U.S. viewers.
QUEST: Kroger's.
MARSHALL: You have to remember business conditions aren't changing immediately for a lot of these companies.
GORANI: Yes.
MARSHALL: So, the changes in immediate business conditions are not justifying these types of movements on the market. So, let's see where it settles.
GORANI: All right.
QUEST: Good to have your -- thank you, sir, for coming in.
MARSHALL: Thank you very much.
GORANI: All right. Thank you, as well. And I'm also going to head out. So, we continue our coverage, though, after a break with Richard and the rest of our team here in London.
QUEST: News never stops nor has to wait.
[04:00:00] (COMMERCIAL BREAK)
