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Hit Hard by Brexit Vote. Aired 3-4a ET - Part 2>
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.
