LONDON – The British stock market and the pound fell in value in early trading Monday even as Britain’s finance minister insisted that the government was “equipped for whatever happens” as a result of last week’s shock public vote to withdraw from the European Union.
Within a few hours of opening Monday morning, the London stock exchange had dropped by 2%, and the pound was down further against the dollar. The decline in stocks was less than some had expected and did not approach the lows hit last Friday in the hours after the official result was declared in the referendum on Britain’s E.U. membership. But the British pound was at its lowest level against the dollar in more than 30 years.
Media and entertainment stocks continued to slide, though nowhere near as dramatically as their heavy losses last Friday. Share prices of ITV and Sky were down, as were those of Vivendi in France, ProSiebenSat.1 in Germany and Mediaset in Italy.
The financial turmoil was accompanied by further disarray in Britain’s political scene. The ruling Conservative Party is now in the grips of a leadership crisis after Prime Minister David Cameron announced that he would resign. The opposition Labor Party has also been badly shaken, with the authority of party leader Jeremy Corbyn in severe doubt following the resignation of more than a dozen members of his parliamentary team.
Britons last Thursday voted by a margin of 52% to 48% to pull their country out of the European Union, becoming the first nation in the trading bloc’s history to do so. Britain now faces years of uncertainty and negotiations to unwind more than 40 years of membership, requiring countless laws to be canceled or rewritten and new trade agreements to be struck.
The overwhelming sentiment in the entertainment industry was in favor of staying in the E.U., reflecting the strong pro-“Remain” feeling in London, where the industry is based. Companies are now hunkering down as they figure out what effect that withdrawal from the E.U. will have on them. The weakened pound could, for example, make British firms attractive acquisition targets for American and European companies looking to expand.
Chancellor of the Exchequer George Osborne, the British finance secretary, tried to calm nerves by saying that the government and other financial institutions had “spent the last few months putting in place robust contingency plans for the immediate financial aftermath in the event of this [referendum] result.”
“It will not be plain sailing in the days ahead. But let me clear, you should not underestimate our resolve. We were prepared for the unexpected, and we are equipped for whatever happens,” said Osborne, who had campaigned for Britain to remain in the E.U. and warned of financial and fiscal catastrophe if it didn’t.
Osborne said he had spoken with the heads of central banks, the International Monetary Fund, and U.S. Treasury Secretary Jacob Lew and Speaker of the House Paul Ryan.
The referendum result has also sparked fear and concern on the Continent, where anti-E.U. parties rejoiced at the outcome and government leaders scrambled to respond. The leaders of Germany, France and Italy are expected to meet Monday to forge a common front in dealing with the E.U.’s second-largest economy quitting the club.
U.S. Secretary of State John F. Kerry also tried to soothe fears, saying in Brussels on Monday: “The interests and the values which brought us together to work for a common good are the same after that vote as they were before.”