- Britain votes to leave the European Union
- Pound plunges to 1985 low, falling below $1.35
- £122 billion wiped off FTSE 100
- David Cameron to step down as prime minister in October
- Government will not immediately trigger 'Brexit' under Article 50
- Vote "highly likely" to trigger second Scottish referendum
LONDON, United Kingdom — In the early hours of Friday morning, Europe awoke to the news that more than half of British voters in the country's EU referendum decided they no longer wanted to be a part of the 28-nation bloc.
With 51.9 percent of voters supporting a decision to leave, against 48.1 percent for remain, Britain’s highly divisive referendum has been closely watched by financial markets and politicians around the world.
The pound plummeted to its lowest level against the dollar since 1985. The euro also fell 3.3 percent against the dollar, its biggest one-day fall since the currency's inception.
European stocks dropped sharply, wiping around £122 billion off the value of the FTSE 100 in companies like Burberry, Mulberry and Jimmy Choo which tumbled in early trade as the markets began to digest the results.
Britain's prime minister David Cameron announced in an emotional speech that he would step down from his role in October, adding another layer of uncertainty to the country's outlook in the coming months.
"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. Critically, Cameron said he would not immediately trigger a so-called 'Brexit' under the Treaty on European Union (Article 50), leaving the decision to a future government.
The result could see a second referendum called on whether Scotland will remain within Britain, with first minister of Scotland Nicola Sturgeon stating that she would take all possible steps to secure Scotland’s place in the EU.
In the run-up to the vote, major banks, corporations and governments around the world warned against an exit from EU, including the IMF, who said Brexit could cause "severe regional and global damage."
German chancellor Angela Merkel said the vote represented “a break in Europe’s history, a break in the process of European integration.” She added that while negotiations are ongoing, Britain would remain a member of the EU, with all rights and commitments to be respected and fulfilled until the actual exit.
“Our goal should be to shape the future relationship between Britain and the European Union in a close and fair manner,” she said, adding that she had invited president of the European Council, Donald Tusk, the French president Francois Hollande and the Italian prime minister Matteo Renzi for talks in Berlin on Monday. She will continue talks with other member states at the summit in Brussels later in the week.
Bank of England governor Mark Carney said the central bank would not hesitate to take additional measures as required as financial markets adjust, in a bid to reassure the markets, and that it was ready to provide more than £250 billion in additional funds. Carney added the bank was also able to provide substantial liquidity in foreign currency, if required.
The European Central Bank said it was ready to provide additional liquidity, in both euro and foreign currencies and in a joint statement, key European figures Donald Tusk, Martin Schulz and Mark Rutte said it was an unprecedented situation but they respected Britain’s decision.
The outcome may see Britain embark on at least two years of complicated divorce proceedings with the EU, raising questions over London’s role as a global financial capital and sending shockwaves across the world, including its fashion industry, which contributed an estimated £26 billion ($38 billion) to the UK economy in 2014.
"I think the industry has to brace for more demand retrenchment," said Luca Solca, head of luxury goods at Exane BNP Paribas. "The most important consequence of 'Brexit' – I think – is a dent to global GDP prospects and damage to confidence. This is likely to develop on the back of downward asset markets adjustments. Hence, more than ever, the industry will have to work on moderating costs and capital expenditure."
"As a global business evolving in a global market, Kering has a long and successful history of adapting to change," the French conglomerate, which owns Gucci, Saint Laurent and Bottega Veneta, said in a statement. "While it is too early to further comment on the implications of this referendum on the luxury business, Kering is confident in its ability to adapt to this new environment. (We) will continue to welcome initiatives to bolster collaboration, be it with regards to trade, talent or the exchange of ideas."
"The biggest impact of Brexit is increased volatility in the market that is already volatile which probably means a decrease of consumer sentiment," said Mario Ortelli, Senior Research Analyst at Sanford Bernstein. "This is not good for the luxury goods companies and if we look at the trading of the shares of the luxury goods companies, probably this Brexit decision will increase the pressure of the market going down, probably the luxury goods companies valuation will falter in the short term amidst this volatility."
"There was an overwhelming support from our designer survey for the UK to remain in Europe and there will no doubt be upset and dismay at today's result that will prompt an outreach to our friends, partners, business colleagues in Europe," added Caroline Rush, chief executive of the British Fashion Council. "We now have a role to play in keeping the government updated on our industry's priorities and keeping the designer community updated on any likely impact to business as our country prepares to leave the EU over the coming years."
"The fashion industry has now to overcome this structural crisis,” said Pascal Morand, executive president of the Fédération Française de la Couture, du Prêt-à-Porter des Couturiers et des Créateurs de Mode, adding that schemes like the Erasmus programme depend upon the mobility of people. "Beyond the political process, it raises the question of European identity and European values of international openness and diversity. They also are core values of the fashion industry, which should not only stick to them but encourage and promote them more than ever."
"We hope that Europe can find agreements such as those with Norway that allow (it) to maintain close commercial relations," said Carlo Capasa, president of the Camera Nazionale della Moda Italiana, adding that he expected to the main effects from Brexit would be the reduction of exports to the UK and other countries, a slowdown in domestic demand and a small decline in sales from Italian fashion companies. "We hope that what has happened with Britain is a warning for Europe to have a less stringent policy and (be) more respectful of the weaker sectors of the population, leading in the medium term to a recovery in domestic consumption."
“Europe is by no means the be all and end all for us,” said Michelle Emmerson, chief executive of Walpole which represents British luxury companies’ interests, adding it would be working closely with its European partners to ensure stability. “It’s an uncertain time, but there will always be a market for quality and we may also see some short term export benefits in a cheaper pound. It is however vital that we retain access to the European Market and we urge the government to keep the luxury industry - worth more than £32 billion a year to the UK - in mind throughout renegotiations.”
"UAL is committed to its students, wherever they come from,” said Nigel Carrington, vice-chancellor of University of the Arts London. “Leaving the EU will undoubtedly have an impact on UAL in the longer-term. We are working on our plans for the transition period and beyond. All of our plans will reflect our ongoing commitment to European collaboration and to our student body."
Stay tuned to BoF for updates as this story develops.