Brexit updates: What’s happening now that Britain voted to leave the EU
Britain may have just lost the last friend it had in the European Union, less than a week after the country voted to abandon the group of nations that had been a pillar of peace and prosperity for the last six decades.
German Chancellor Angela Merkel warned in no uncertain terms Tuesday that Britain can forget about any special favors or advantageous trading privileges with the EU. In a frosty speech to Germany’s parliament, she said there would be no negotiations whatsoever until the British government makes a formal request to leave.
I can only urge our friends in Britain against deluding themselves.
Angela Merkel, German chancellor
America’s top diplomat sought to soothe fears Monday on both sides of the Atlantic as aftershocks of Great Britain’s vote to withdraw from the European Union, the world’s largest trading bloc, continued to rattle markets and governments.
“The interests and the values which have united us for such a long period of time did not change on the day of that vote,” Secretary of State John F. Kerry said in Brussels, headquarters of the EU bureaucracy that British voters jilted.
Kerry seemed to be trying to convince himself as much as the anxious European officials with whom he was meeting. He was scheduled to pay a call on British Prime Minister David Cameron, who announced plans Friday to resign after the “Brexit” vote.
Though the Obama administration attempts to put on a brave face while confronting the future of its most important transatlantic relationship, the loss of a strong British voice in broader European security, economic and other matters will hurt, analysts agree.
Just over a year ago, British financial traders were celebrating a landmark court victory over their European rivals. The Luxembourg-based General Court had overturned a demand by the European Central Bank that clearing of trades in euro-denominated assets take place only in countries that use the euro as their currency.
British Chancellor of the Exchequer George Osborne hailed the ruling as “a major win for Britain” that preserved London’s place as Europe’s dominant financial center. Given that Britain was a member of the 28-nation European Union but not of the Eurozone — it retains its own currency, the British pound — the ECB ruling could have forced tens of trillions of dollars in currency and securities trading to leave London and move to Ireland or the Continent.
Today that court victory lies in tatters, and the prospects for the London financial services industry are dire. Last week’s British vote to leave the EU will mean that Britain can no longer claim that the ECB’s directive unfairly discriminates among members of the union.
With markets in free fall after Britain’s vote to leave the European Union, Spanish voters turned away from anti-establishment parties Sunday and endorsed the perceived safety and security of ruling conservatives.
Europe has been watching Spain to see how anger at the status quo might play out in another EU country after “Brexit.” In recent weeks, a left-wing anti-establishment alliance called Unidos Podemos (Together We Can) had surged in opinion polls to become the No. 2 force in Spanish politics, behind the conservatives. Its slogan is ‘Sí se puede’ — Yes we can.
But election results early Monday showed they couldn’t. Unidos Podemos placed third, behind the two establishment parties, the Partido Popular, or Popular Party, and the Socialists.
California and its $5 billion of annual exports to Britain could be standing in harm’s way if there’s economic upheaval caused by Britain’s vote to leave the European Union.
The state is a major trading partner with England and the rest of Britain, whose vote to exit the EU — the so-called Brexit — rocked financial markets Friday, with stocks plummeting worldwide and the British pound sterling falling sharply against the dollar.
The question facing California companies doing business with Britain — which includes commercial real estate investment, technology and car dealers — is whether the weaker pound and other fallout from the vote will slow British economic growth and make California’s dollar-denominated exports too expensive, thus reducing trade.
“If the entire EU market destabilizes because of Brexit, it can have dire consequences for the California market, which is dependent on international trade,” said Stephen Cheung, president of World Trade Center Los Angeles, an affiliate of the Los Angeles County Economic Development Corp.
—James F. Peltz and Samantha Masunaga
“Bull markets” -- that is, times when stocks are rising or expected to rise -- “are about cooperation,” Jeffrey Gundlach, chief executive of downtown Los Angeles money manager DoubleLine, said Friday. “That’s what makes societies thrive. If we don’t cooperate at all, we’re all out there in the woods with a spear chasing a squirrel.”
The landmark “Brexit” vote, he said, is evidence we’re living in an increasingly uncooperative world. That’s why he said he’s betting on gold, short-term bonds and other assets seen as safe havens.
Britain’s move could be a catalyst for a reenergized effort by Scots -- who overwhelmingly favored remaining in the EU -- to break away from Britain. It may also encourage other secession movements in the EU, which could fundamentally alter the political and economic structure that has been in place for decades.
At the same time, forces that once propelled globalization -- advanced technologies, reduction of barriers and the rise of China and other developing economies -- have diminished. World trade and economic growth have also slowed in recent years.
With the so-called Brexit vote, the European Union, itself arguably the most ambitious post-World War II experiment in globalization, appears at risk of unraveling.
Great Britain’s decision to leave the European Union has sent shock waves around the world. Early polls had indicated that the camp pushing to remain in the EU would likely succeed, even by a small margin. But in what was the highest turnout for a British-wide vote since the general election of 1992, a majority of British voters decided it was time to end a political and economic relationship 43 years in the making.
So what went wrong for those who wanted to remain?
The ‘leave’ camp was organized around fear of immigration, Islam, globalization, China. The other side found themselves on the defensive trying to counter the argument of fear. It’s very difficult to challenge people’s fears. There is deep-seated racism in this debate that gets cloaked in national identity.
Dominic Thomas, chair of the department of French and Francophone Studies at UCLA
The “Brexit” vote doesn’t mean American companies will lose business or see revenue from Britain drop or vanish. But their sales could be affected by whatever new trade deal Britain negotiates with the U.S. once it leaves the European Union.
So how exposed are California businesses?
The state’s 20 largest companies combined brought in about $55 billion in revenue from Britain in their most recent fiscal year, according to reported figures and estimates from FactSet. (Two of those 20 — Wells Fargo & Co. and PG&E Corp. — are not on the above chart because no revenue from Britain was listed.)
Another company that could be vulnerable is Los Angeles-based CBRE Group Inc., the world’s largest real estate services firm. It booked nearly 18% of its revenue from Britain in the last year, according to FactSet.
CBRE declined to comment Friday. However, in an April earnings call, Chief Executive Bob Sulentic acknowledged there was concern about the British real estate market in the run-up to the vote. But he said that CBRE had a strong first quarter there. “If the vote fails, obviously, there will be a pause till people figure it out,” he said.
—James Rufus Koren and Andrew Khouri
Britain’s decision to leave the European Union might not mark the beginning of the end for continental unity, but that possibility was in the air Friday as Europe’s leaders struggled to put the best face on their new reality after the “Brexit” vote.
“There’s no way to put a positive spin on this -- today is a setback for Europe,” said a glum-looking German Chancellor Angela Merkel, urging the continent to remain “prudent” and analyze the situation calmly. “The EU is strong enough to find the right answers.”
The surprise vote to leave the EU encouraged anti-establishment parties in France, Denmark and the Netherlands to push for their own “leave” referendums, and also unleashed powerful separatist forces within Britain itself. Political leaders in Scotland and Northern Ireland, where voters opposed the Brexit, said they want to leave Britain so that they can remain in the EU.
This is an historic breaking point and the shock waves are simply too enormous to fully gauge at this point.
Paul Nolte, a political scientist at Berlin’s Free University
Britons woke up Friday to a bewildering new world fraught with uncertainty: Who will run the government? What kind of relationship will Britain have with the rest of Europe? What will happen to jobs, trade and prices? Will the economy collapse?
Economic analysts had warned that a British exit from the EU, or “Brexit,” could push Europe’s second-largest economy back into recession, with repercussions felt around the world.
Major stock indexes in Asia, Europe and the U.S. tumbled Friday, and the British pound fell by more than 10%, to a 30-year low of below $1.35, before a slight recovery.
Scotland, meanwhile, was threatening to launch a new referendum on independence, creating new uncertainty over the future not only of Europe but of the United Kingdom itself.
Former London Mayor Boris Johnson, a strong proponent of leaving Europe who has been one of those favored as Britain’s next prime minister, vowed Friday that Britain would remain “a great European power” and was faced with a “glorious opportunity” to take control of its own future.
We cannot turn our backs on Europe. We are part of Europe. Our children and grandchildren will continue to have a wonderful future as Europeans traveling to the continent, understanding the languages and cultures, that make up of common European civilization.
Boris Johnson, former London mayor
—Ginanne Brownell Mitic and Alexandra Zavis
The Dow Jones industrial average plummeted 610 points, or about 3.4%, on Friday as global stock, currency and other markets convulsed in response to Britain’s surprising vote to leave the European Union.
The so-called Brexit shouldn’t lead to a recession in the U.S., experts said.
Still, the turmoil caused by the referendum wasn’t good news for the struggling U.S. economy. It marked another in a seemingly unending series of foreign and domestic crises in recent years that have slowed the recovery from the Great Recession.
Britain’s decision to exit the European Union has affected all aspects of British society – even science.
On Friday, the Royal Astronomical Society, which works to advance science research in Britain, took a break from promoting new findings in astronomy and geophysics to weigh in on the results of the referendum.
“Now that the result is clear, albeit by a narrow margin, the whole scientific community, including the RAS, will need to consider the implications for research in the U.K.,” the organization said in a statement.
Odds already were low that Federal Reserve policymakers would raise their key short-term interest rate next month. Now the “Brexit” vote has taken a rate hike off the table.
On Friday, a closely watched barometer by the CME Group futures exchange put the odds at zero of a small increase at the U.S. central bank’s late July meeting. On Thursday, the odds had been about 12%.
Investors actually think there’s a better chance — 4.8% — that the Fed would trim the rate back down to almost zero. The rate now is between 0.25% and 0.5%.
The benchmark federal funds rate had been held near zero for seven years in an attempt to boost economic growth during and after the Great Recession. Fed policymakers nudged it up 0.25 of a percentage point in December and have indicated they planned two similar hikes this year.
But after surprisingly slow job growth in May, and with the Brexit vote pending, the Fed held off on a rate hike after its meeting last week.
Fed Chairwoman Janet L. Yellen and her colleagues correctly anticipated financial market turmoil if Britain voted to leave the European Union. An interest rate hike also can roil financial markets by making stocks less attractive investments, and Fed officials don’t want their actions to add to the tumult.
If you’re looking for something to blame for the chaos unleashed on world markets Friday morning by Britain’s vote to leave the European Union, consider Chicago pizza — at least if you believe the British press.
London’s Financial Times and other British media reported that during a meeting at a pizzeria at Chicago’s O’Hare International Airport in May 2012, British Prime Minister David Cameron agreed to grant voters a referendum on Europe.
Cameron — who’d urged his countrymen to vote to stay in the EU — resigned Friday morning after the shocking result saw the value of the British pound plunge to its lowest rate in 30 years.
But he might have saved his career, and the union, had he skipped sharing a pizza with his foreign secretary, William Hague, and chief of staff, Ed Llewellyn, according to the Financial Times and other British media.
—Kim Janssen, Chicago Tribune
Britain’s vote to exit the European Union will have an impact on Americans’ investment portfolios, retirement savings and more. Here’s how:
1. The U.S. stock market
Why is the fate of Britain’s EU membership intertwined with U.S. markets? One reason is that businesses hate uncertainty.
American banks forecast a 5% to 9% drop in profits next year for U.S. businesses when Britain leaves the EU, according to the investment bank KBW. The economic hit here will come as businesses hold off on making investments until the full impact of Britain’s withdrawal from the EU is known.
Business investments create jobs and generate future profits, so British voters may have just taken away some confidence in the U.S. economy.
—Jonathan Todd, NerdWallet
Britain’s stunning vote Thursday to leave the European Union was part of a dramatic internal struggle over the country’s identity, culture and independence that will transform its role in the world for the foreseeable future.
It will undoubtedly cause economic pain for its citizens while likely sparking a fresh Scottish referendum on independence, as well as a possible reassessment within Northern Ireland of its place in the United Kingdom.
The “Brexit” vote may turn out to have been a blunder of historic proportions: Instead of affirming Britain’s identity and independence, it could tear the country apart.
One lesson of the British vote is not to become complacent, not to assume that voters will eventually come to their senses and opt for the safe, responsible choice.
Times Editorial Board
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