UK votes to leave and heads for uncharted waters
A new dawn has broken, and scarcely a person in the UK – in favour of Leave or Remain – can believe it has happened. The UK has decided to leave the EU by 52% to 48%. Despite the verdict the country is split, virtually down the middle, and it’s not clear how that will play out in the weeks and months ahead. The Prime Minister has announced he will step down by October and there will be a contest to succeed him in the next few months. The question is also raised whether there will be a General Election to establish a popular mandate for the next leader.
It started last night in Newcastle, where the vote for Remain was much lower than expected during the first count announcement, and was followed up by neighbouring city Sunderland where a massive majority in favour of Leave illustrated the challenge ahead for Remain. Newcastle’s 1% victory for Remain left many with the belief that it was impossible for Remain to overcome the inevitable result. As count after count came in, it was clear that – with the exception of London, Scotland and Northern Ireland – people were voting for Leave in large numbers. Having started the day with the polls expecting the Remain camp to win by a few percentage points, it became apparent that the reverse was in fact the case. Turnout was high at 72% with 17.4 million people voting in favour of exit against 16.1 million voting to remain.
The markets have reacted as expected: Sterling has fallen to its lowest level against the dollar since 1985 and the FTSE opened down 5%. Banking stocks are seeing heavy losses in early trading in Europe. Credit rating agency Standard & Poor's has said the UK is likely to lose its AAA rating, while German bund yields have fallen into negative territory as investors look for safe havens.
Bank of England Governor Mark Carney has also made a statement, saying that the Bank of England has contingency plans for the result and that there is £250 billion of extra funds available and they will be monitoring the markets ready to deal with short term volatility.
The big question is who will be the next leader of the Conservative Party and therefore the Prime Minister. Candidates include lead Leave proponents Boris Johnson and Michael Gove as well as potential conciliatory candidates like Theresa May, Home Secretary. The contest will take place over the summer with the new leader installed by party conference in October. Candidates will come forward over the next weeks. The next Conservative leader will automatically assume the role of Prime Minister and a general election before then is unlikely. But the UK is now in uncharted waters.
It is likely that key Cameron allies – particularly Chancellor George Osborne - will assess their own positions. Others who may come under pressure include Energy Secretary Amber Rudd, Defence Secretary Michael Fallon, and Shadow Business Secretary Sajid Javid. This would leave the Conservatives with fewer heavy hitters, and in a position where the Government will likely be at sea for some time. There will be a knock-on effect on the opposition Labour Party, where Jeremy Corbyn will feel pressure from critics who will say he did not do enough to persuade Labour voters.
The outcome of the referendum raises profound questions for the integrity of the UK itself, with Scotland and Northern Ireland both strongly backing Remain. Scotland's First Minister Nicola Sturgeon has said that the EU vote "makes clear that the people of Scotland see their future as part of the European Union" after all 32 local authority areas returned majorities for Remain. It is more than likely the SNP will call for a fresh referendum on independence.
As the Prime Minister made clear this morning, there will be little structural change immediately. The process of unravelling the UK from the EU will take years. In practice that means freedom of movement and labour and the ability to trade with the rest of the EU will not change for now. But this vote will send shockwaves across the other countries in the EU, particularly those, like France and Germany, facing elections in the coming year. A wave of underlying Eurosceptic sentiment could now be unleashed as the EU wrestles with its future.