UK Loses Perfect AAA Credit Rating; UK Economy Downgraded by S&P; British Bank Shares Plunge for Second Day; Cameron: Brexit Negotiations



British Bank Shares Plunge for Second Day; Cameron: Brexit Negotiations

Will Be Complex; Cameron Condemns Post-Brexit Racial Abuse; Merkel: Brexit

Process Begins With Article 50; Salmond: Scotland Cannot "Veto" Brexit; EU

Leaders Mapping Out Post-UK Future; 11,000 UK Jobs Hang in Balance of Tata

Deal; Brexit Vote Creates Uncertainty Over Trade Rules; England Knocked Out

of Euro 2016. Aired 4-5p ET - Part 2>

Ivan Watson, Kate Riley >

Gareth Stace>

the U.K. its perfect credit rating from all three of the major agencies.

Fitch has now joined S&P and downgraded the United Kingdom to AA. Two out

of the three now have the U.K. at AA, which is the rating of France,

Germany, Liechtenstein and Luxembourg. On Wall Street, investors were

running for safety and the Dow fell 200 at the open and never looked back.

It was off 300 at one particular point. British Prime Minister, David

Cameron, said Britain will not start the Article 50 process until a new

prime minister is appointed. The U.K. needs to first determine the kind of

relationship it wants with the European Union. The Prime Minister says the

task facing the civil service is the most complex job they've faced for

decades. The U.K. trade negotiations will fall largely into the hands of

the foreign office or the TTI, which has about 4300 employees, compared

with the European commission with nearly 33,000 Nothing in the U.K. will

change until it's invoked Article 50 of the Lisbon Treaty, and only the

U.K. can press that trigger. Once pressed, a two-year countdown actually

begins and the European Council will appoint the negotiators and then

negotiations begin. Angela Merkel didn't say "not a matter of days." but

the message that the Italian, French and German leaders gave after their

meeting here in Berlin was, it's time to get this ball rolling. The second

business day since the vote, and international companies are already

reconsidering their investments in the U.K. A deal to buy a major British

steel factory owned by Tata is probably in doubt as are 11,000 jobs.

England has been knocked out of the European championships by Iceland>

Stock Market >


QUEST: A very good evening to you. I'm Richard Quest. There is a lot more QUEST MEANS BUSINESS in just a moment. I am going to be joined by the director of UK Steel as Brexit throws plans to save the country's steel industry into some doubt. You'll hear also from the former Scottish first minister. Alex Salmond will tell me why Boris Johnson would do well to stay clear of Scotland.

All of that still to come but of course this is CNN. On this network, the news always comes first.

Britain's vote to leave the European Union has cost the country its perfect AAA credit rating from all the agencies. Two agencies, Standard and Poor's and Fitch, have downgraded Britain by two notches to AA. S&P says Brexit may lead to a deterioration of the British economy.

[16:35:00] The Prime Minister, David Cameron, has condemned reports of racial abuse across the U.K. in the wake of the vote. A Polish society was vandalized with a racist slogan in London, and anti-Polish leaflets have been distributed in Cambridgeshire. Mr. Cameron says hate crimes cannot be tolerated.


DAVID CAMERON, BRITISH PRIME MINISTER: In the past few days we've seen despicable graffiti daubed on a Polish community center. We've seen verbal abuse hurled against individuals because they're members of ethnic minorities. Let's remember, these people have come here and made a wonderful contribution to our country. We will not stand for hate crime or these kinds of attacks. They must be stamped out.


QUEST: The Turkish President has offered his condolences to the family of the Russian pilot who was killed by Turkish forces last year. It follows a claim by the Kremlin that Turkey had apologized to Russian President Vladimir Putin. President Erdogan's statement says he shares the family's pain.

The defending champion, Spain, are out of euro 2016 championships after a 2-0 defeat by Italy. The Italians will now face the world champions Germany in the quarter final. The last round, 16 games between England and Iceland, the English find themselves 2-1 down, and there are 20 minutes still to play.

Nothing in the U.K. will change until it's invoked Article 50 of the Lisbon Treaty, and only the U.K. can press that trigger. Once pressed, a two-year countdown actually begins. The European Council will appoint the negotiators and then negotiations begin. The workout of the U.K.'s exit and future relationships during that negotiation. And then the final deal with put to the Parliament and it goes back to the council for an agreement.

The U.K. is excluded, of course, when the council is considering that particular deal. All in all, one of the biggest single most important aspects, the negotiation of access to the single market. The freedom of movement question. The aviation market. And the EU presidency. When you look at it all and you put it together in this two-year time frame, approving the deal shows there's plenty of room for a spanner in the works.

Think about it. The deal must pass the European parliament. It must get an EC double majority with qualified majority voting in the council of ministers, 72 percent of the remaining countries, that's 20 in total, representing 65 percent of the population.

The U.K. parliament may also need to approve it, as indeed, and think about the clock ticking, as indeed may 27 states have to approve treaty changes or various policy differences. So what happens if, as the time moves on, there's no agreement within two years? Then the treaties simply no longer apply to the United Kingdom. That is unless there's unanimous agreement for an extension. I asked the former First Minister of Scotland, Alex Salmond, if he thinks the U.K. should not invoke Article 50 until a new PM is in place.


ALEX SALMOND, FORMER FIRST MINISTER OF SCOTLAND: Oh yes, but that is the nub of the problem. That means there's a two or three-month vacuum when no plan arises. I mean when you're asking to do something, it's a good principle if you break it, you own it. If the Brexitiers have broken it, they've broken the system. Then you would have thought at some point over the last year, when they were planning the Brexit campaign, they would have had something in hand to bring forward as their plan even before they get into office. This is a really damaged vacuum. That's more important I think than this delay before the invocation of Article 50.

QUEST: On the question of Scotland, first of all, there seems to be a view that the Scottish Parliament is not legally competent to veto any Brexit, because ultimately the building behind you is sovereign. So suggestions by the first minister over the weekend that they could veto it or have some form of veto simply are not valid.

[16:40:00] SALMOND: The first minister didn't say that. What the first minister said is the Scottish Parliament will withhold letter of consent, that is exactly what she said, I saw the interview. That's not the same thing as a veto. Because you're quite right, Westminster has an override to be exact in Clause 28 of the Scotland Act, they can say, well, ignoring the Scottish Parliament we're going to go ahead anyway. Of course there's a political cost of doing that.

QUEST: But you accept that because of that section of that act, that the parliament cannot prevent the Brexit going ahead, because Westminster can overrule it.

SALMOND: Yes. The parliament can block and tackle. They can obey the instruction from the Scottish people so firmly for remain. But it's not a veto because Westminster can override. But remember, that vote would then have to go to the floor of the House of Commons, which has got a majority of remainer MPs. Who then will be asked not only to vote for Brexit which they might have to swallow, but to vote to overrule the Scottish Parliament, which might give them pause for thought.

QUEST: From your point of view, from the SNP's point of view, I know because you told me last week that you wanted to have the referendum on your terms and on your time scale.

SALMOND: Yes, indeed.

QUEST: But the moment that the invocation of Article 50 happens, you no longer have that luxury, do you?


QUEST: Because you're also on a two-year time scale.

SALMOND: Correct. Once after the gun is fired on Article 50, there's a two-year time scale. But remember, you must have seen the huge commentary coming from Scotland, people who voted no in 2014 who are publicly announcing they've changed their view. Most importantly, in my view, one of my predecessors, the labor first minister, Henry McLeish has publicly announced this is the straw that has broken the Unionist back in Scotland, and he is now supporting independence.

QUEST: When Boris Johnson says there's no appetite for a second referendum in Scotland on this question at the moment.

SALMOND: Let me give Boris some free advice, I've watched him over the last couple of nights getting booed in Islington. My advice is don't come to Scotland anytime soon.


QUEST: The first minister or the former first minister of Scotland, Alex Salmond.

We've heard a lot in the course of the program as the Brexit is seen obviously from Britain, because that in some ways is the locus of where the decision has to be taken of how to do it. Now of course the story from the European side. Don't waste time. The message from EU leaders to Britain regarding the split. Chancellor Merkel, President Hollande, Prime Minister Renzi met in Berlin on Monday. The German Chancellor said it's up to Britain to make the next move.


ANGELA MERKEL, CHANCELLOR OF GERMANY: We of course wish to not have a stalemate here. It doesn't mean it's about days, but we have to make sure that we will not be hanging in the balance. The step has to be taken by Great Britain.


QUEST: Ivan Watson is in Berlin for us tonight. Ivan, if the Prime Minister, the British Prime Minister, is intending at least September, because of the new government and the need to put in place a policy, can those three leaders live with September or October? Not that they have much choice about it since it's the U.K.'s decision, but will they be agreeable to it?

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: You know, Angela Merkel in her statements today has not given a specific time frame. She didn't say "not a matter of days." but the message that the Italian, French and German leaders gave after their meeting here in Berlin was, it's time to get this ball rolling, we do have to move, you can't hold the other 27 members of the European Union hostage, waiting for Britain to finally make this announcement, finally invoke Article 50 and start the ball rolling.

[16:45:00] The other statement that all three leaders made pretty much in unison was that Great Britain cannot begin any informal negotiations until that Article 50 is invoked, until Britain really formally announces that the divorce will begin.

QUEST: That's fascinating, because there's clearly a view by the British that they would like to see the lay of the land, they want to basically sound out other governments about how they view the process, what the British are asking for, and all these sort of things. And they pretty much got the door shut in their face today by those three leaders, didn't they?

WATSON: That's true. And all of them also, you know, it's important to note they expressed regret at the results of the referendum but also said they respect the choice of the voters. And now it seems very clear certainly that France and Germany, as two founding members of the European Union, are beginning a process of trying to look forward, of trying to salvage the rest of the European Union, acknowledging that there are major problems, major challenges within the European Union that have to be addressed, that the concerns of other citizens have to addressed.

And that the European Union has to move forward and start to kind of reinvent itself. So you had the German and the French foreign ministers putting out a long statement with suggestions to form the first multinational coast guard, for example, to address the external and internal threats the European Union faces, and most notably, to address the economic challenges that continue to cause misery within the remaining members of the European Union, Richard.

QUEST: Ivan Watson, who is in Berlin. Ivan, thank you for looking at that side of the story. You already heard about from Lord Bilimoria about how Cobra Beer is being affected by things. Now we are seeing the first signs that the Brexit vote could impact international investment. A deal for Tata's steel in Britain is looking ever more complicated. The director of UK Steel will be with me after the break.


QUEST: The second business day since the vote, and international companies are already reconsidering their investments in the U.K. A deal to buy a major British steel factory owned by Tata is probably in doubt as are indeed the 11,000 jobs. With me is Gareth Stace the director of UK Steel, good to see you, sir, thank you. It can't be good news for those at Tata Steel. Let's face it, which company will buy a steel company in a country that's about to leave the single market?

GARETH STACE, DIRECTOR, UK STEEL: Well, exactly. You know, where are we today? The vote really wrapped a cloak of uncertainty right around our sector at a time, as you said, Richard, where we can least tackle it, because really, over the last year, what we've seen is our sector nearly smothered with the worst steel crisis we've seen in over a generation. But we're in a worse place today than we were last week.

[16:50:00] QUEST: I can make an argument both ways. Let's first of all deal with Tata. Do you think this kills off anybody wanting to buy Tata Steel because of the uncertainty?

STACE: It certainly makes it much more difficult. That's why we need government right away to say, yes, we're going to reassure the market, we're going to get the best deal for you in terms of trade, access to the single market.

QUEST: But they can't say that and you know they can't say that.

STACE: If they don't say that, we'll get more and more uncertainty. We have an uncertain future for the steel sector at a time when government was trying to help us level the playing field on costs like energy costs, business rates, and on trade. And now all bets potentially could be off. So we need that reassurance from government. And we can't have the excuse that oh, well, this is Brexit, oh, this is tory leadership. We need government to stand by us. This wasn't our making. This was government's making in terms of Brexit.

QUEST: Longer term, arguably, away from Europe, a steel industry, assuming there's one that's still survived this whole process, could be better off if the British government took a more robust view about protection against Chinese imports than, say, the Europeans have with quotas and limits.

STACE: Yes, but what we've actually seen is actually the European Commission, believe it or not, is more hard line on Chinese imports than the U.K. government. The U.K. government doesn't want to go as far as Europe. So actually we could be in a worse place there. But the big thing for us is certainly trade. We've heard on your program that the U.K. government doesn't even have enough trade experts to fill a small kitchen, let alone the 300 or more that they're going to need to make sure we get the best deal, not just a deal, but the best deal, so that it's better to be out than in.

And we as the steel sector are not convinced of that. QUEST: For the five or six steelmakers still in the United Kingdom, on their behalf how worried are you tonight?

STACE: I'm particularly worried at the moment because we haven't seen a real firm plan by this government and the vote leave campaign to say how we're going to ensure the future of the steel sector that we can invest, grow, and contribute to the U.K. economy.

QUEST: Sir, the bad news just keeps rolling in. Bear with me one moment. Can you just confirm that before I spread a huge amount of grimness? I'm told -- there it is. You can see it on the screen. As if Brexit wasn't bad enough, England is knocked out of euro 2016. And it was Iceland that knocked them out. I'm just waiting for somebody to tell me the score. It was 2-1. So what happened was England took an early lead. Iceland equalized pretty quickly thereafter. Iceland then went 2-1 up, and that's the way it remained for the rest of it.

I'm afraid I don't have a huge amount of good news to bring you tonight. This is QUEST MEANS BUSINESS. but you are most welcome.


[16:55:00] QUEST: Brexit of a different kind. The mood in London is about to get even worse. England has been knocked out of the European championships by Iceland. Forgive me when I said bad news, it's good news if you're watching in Iceland, but I'm standing in front of Big Ben and that's pretty grim. Kate Riley is at CNN center, Iceland knocking out England, and Kate, what happened?

KATE RILEY, CNN, WORLD SPORT: Yes, what happened indeed. It all looked very promising for England going ahead just moments after kickoff, Wayne Rooney with the penalty there. And then those celebrations, Richard, very short-lived. 34 second later, Iceland would get that equalizer, and then after 18 minutes of action, they would get that winner, that second goal. And ultimately it would progress to the quarter finals.

Iceland, this tiny country of 330,000 people, they now progress to the quarter finals. They will meet France next. England packs their bags and go home. In fact, fans in Nice this evening chanting, "you're not fit to wear this shirt" at Roy Hodgson's men down in Nice this evening. So huge embarrassment, but a fantastic win for Iceland, 2-1 is how it ends there. And arguably their greatest result in their history.

QUEST: And a wonderful country it is, Iceland. They will be celebrating in Reykjavik tonight.

A Profitable Moment is with you after the break. QUEST MEANS BUSINESS, good evening.


QUEST: Each time I try and think about what is happened and how everything moves forward, you almost get a headache. Tonight's Profitable Moment the bad news just keeps rolling on. First of all, the downgrades from Fitch and S&P, the Europeans are making it clear that there can be no informal negotiations, the Labor opposition is just about collapsing and the Conservative Party, ruling party says the new prime minister won't be in place until September 2.

But that is the picture that we face tonight, and as Big Ben chimes the hour, that's QUEST MEANS BUSINESS from London. I'm Richard Quest. Whatever you're up to in the hours ahead, I do hope it's profitable.


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