George Osborne battles to calm Brexit nerves... but pound plummets and bank shares tank

WEST END FINAL

Get our award-winning daily news email featuring exclusive stories, opinion and expert analysis

I would like to be emailed about offers, event and updates from Evening Standard. Read our privacy notice.

George Osborne today broke his silence to try to steady nerves after the Brexit bombshell — and withdrew the threat of an emergency Budget.

In a 7.15am statement at the Treasury, timed to reassure the markets, the Chancellor said the UK economy was “about as strong as it could be” to withstand the shock of the EU referendum.

He rejected demands from Brussels to begin the formal exit process immediately, saying Britain would wait until a new Prime Minister was in place.

Mr Osborne announced that there was no need for the so-called “punishment Budget” to shore up the public finances that was threatened during the referendum campaign, saying the right time to consider whether drastic action such as tax rises or further spending cuts were needed would be in the Autumn Statement.

Reassuring tone: George Osborne
Getty

Boris Johnson declared that the Chancellor’s calming statement showed that “project fear is over”. But the aftershocks of last week’s momentous vote were continuing to rock the economy and the political world.

  • The pound had lost 2.5 per cent against the dollar and more than two per cent against the euro by mid-morning, despite Mr Osborne’s statement.

  • Share trading in RBS and Barclays were suspended  temporarily after massive selling. 

  • The FTSE 100 was down one per cent mid-morning amid rollercoaster rises and falls, with top shares worth around £15 billion less than at the opening.

  • The leadership crisis engulfing Labour intensified with more resignations by shadow ministers. Jeremy Corbyn responded by appointing a team of unknowns to senior posts.

  • A petition demanding a second EU referendum hit 3.6 million signatures, including 700,000 Londoners. 

  • An ally of German Chancellor Angela Merkel said Britain would get “no savings” from quitting if it wanted to stay in the single market. Former deputy premier Nick Clegg said the Brexiteers must face the “stark choice” of accepting free movement and a financial fee if they wanted to retain free access to a market of 500 million consumers.

  • Conservatives were meeting to set rules for a leadership contest with  Mr  Johnson maintaining his frontrunner status while rivals sounded out supporters.

Looking tired after 72 hours of telephone talks with investors and central bankers, the Chancellor said: “It will not be plain sailing in the days ahead. But let me be clear — you should not underestimate our resolve.

“We were prepared for the unexpected and we are equipped for whatever happens. And we are determined that, unlike eight years ago, our financial system will help our country deal with any shocks and dampen them, not contribute to those shocks or make them worse.”

He then went into an emergency Cabinet session at No 10, chaired by David Cameron.

Following talks with Bank of England Governor Mark Carney and fellow finance ministers and international economic organisations, Mr Osborne said that “further well-thought through contingency plans” were ready to be deployed if needed.

Talks with the Chancellor: Governor of the Bank of England Mark Carney
PA

He also dropped a hint that he may stand for the Conservative leadership himself, saying he would “address my role within that in the coming days”. Allies said he was definitely not ruling out a bid and denied media reports that he might support Mr Johnson.

Saying he would honour the referendum verdict, he added: “I take a simple view of life, which is ‘It’s my country, right or wrong’ and I intend to fulfil my responsibilities to the country.”

Mr Johnson responded as he left his home: “It is clear now that Project Fear is over, there is not going to be an emergency budget, people’s pensions are safe, the pound is stable, the markets are stable, I think that’s all very good.”

Path cleared: Boris Johnson leaves his home amid mounting confidence he will be the new PM
Getty

Fellow Leave campaigner Michael Gove, now being tipped as a possible chancellor if Mr Johnson enters 10 Downing Street, said Mr Osborne had provided “the reassurance that people need”. He added: “I’m looking forward to hearing the Prime Minister’s statement later today. I listened to the Chancellor and I found his words incredibly reassuring.”

However, there was confusion among the Brexit-backers about what a future relationship with Europe would look like. Mr Johnson used an article to insist that Britain could introduce a points-based immigration system while maintaining access to the single market. But that was scorned by Michael Fuchs, vice chairman of Ms Merkel’s CDU party. “Either you are in the club or you are not.”

He said Britain would have to abide by free movement rules to stay in the market, and pay an annual fee because “it is not for free”.

He added: “The capita fee for Norway is exactly the same as Britain is paying into the EU— so there won’t be any savings.”

Former Labour chancellor Alistair Darling fumed: “We have no government, no opposition, the people who got us into this mess have run for cover. We cannot wait for months to discuss these issues.”

Responding to Mr Osborne’s statement, shadow chancellor John McDonnell told Sky News: “I think that his message that Britain is open for business is exactly the right one, but I’m concerned that the economy is fragile as a result of his mismanagement of the economy.”

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in