Osborne seeks to reassure markets after Brexit vote

Chancellor George Osborne after a press conference at The Treasury, London, where he moved to try to calm market turmoil triggered by the pro-Brexit vote. PRESS ASSOCIATION Photo. Picture date: Monday June 27, 2016. Mr Osborne spoke ahead of the start of financial trading and outlined how the Government will "protect the national interest" after its humiliating defeat in the landmark nationwide poll. See PA story POLITICS EU. Photo credit should read: Stefan Rousseau/PA Wire©PA

Chancellor George Osborne has broken his silence since the UK’s decision to leave the EU in an effort to calm markets as sterling resumed its post-referendum historic slide.

He told a press conference that “Britain is ready to confront what the future holds for us from a position of strength.”

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The result of the referendum is “not the outcome that I wanted,” the chancellor said, but authorities were “ready to deal with the consequences.”

The pound weakened further in Asian trading as initial shock over Britain’s vote to leave the EU was replaced by anxiety over the repercussions for the country’s economy.

Although the UK currency remains above the low touched in a turbulent day’s trading on Friday, it fell a further 2 per cent to as low as $ 1.3356 early on Monday and weakened 1.3 per cent against the euro to 82.30p.

On global markets, investors remained jittery with the Japanese yen, a safe haven currency, strengthening 0.3 per cent to ¥101.86, while gold climbed 0.9 per cent to $ 1,327.77 an ounce. The FTSE 100 is expected to open 1 per cent lower.

Mr Osborne said he did not ‘resile’ from his forecasts made before the referendum on the impact of a vote for Brexit. But he backed away from his warning before the referendum that an emergency budget would be needed within two months to raise taxes and cut spending.

“Of course the economy is going to adjust and there will be an impact on the public finances. That’s what I said before the referendum — I don’t resile from anything I said before the referendum,” he said.

“I said there would have to be actions, actually as it happens in the autumn, to address that. But it’s perfectly sensible to wait until we have a new prime minister to address that.”

Mr Osborne’s new position is in line with the views expressed by most experts before the vote — that it would be sensible for fiscal policy to support the economy in the short term, even if tax rises or spending cuts were required later on.

He said the UK should not trigger Article 50 of the EU treaty, which sets a two-year deadline for leaving the EU, until it has a “clear view” on the future.

“The prime minister has given us time as a country to decide what that relationship should be by delaying the decision to trigger the Article 50 procedure until there is a new prime minister in place for the autumn,” he said.

“Only the UK can trigger Article 50, and in my judgment we should only do that when there is a clear view about what new arrangement we are seeking with our European neighbours.”

“In the meantime, and during the negotiations that will follow, there will be no change to people’s rights to travel and work, and to the way our goods and services are traded, or to the way our economy and financial system is regulated.”

Financial market volatility is likely to continue, he said, but over the past 72 hours, he has been coordinating with fellow finance ministers in Europe, the IMF, central banks and the US Treasury Secretary to ensure markets can handle the shock.

“It will not be plain sailing in the days ahead but let me clear you should not underestimate our resolve. We were prepared for the unexpected and we are equipped for whatever happens.”

“Markets may not have been expecting the referendum result — but the Treasury, the Bank of England, and the Financial Conduct Authority have spent the last few months putting in place robust contingency plans for the immediate financial aftermath in the event of this result.”

Mr Osborne’s closest friends say he will not quit for now as chancellor and he sees it as his duty to stay at the Treasury at a time of severe market turmoil and growing doubts about Britain as an investment destination.

The chancellor spent the weekend ringing G7 finance ministers and central bank governors, attempting to reassure them that Brexit would not wreck the economy.

Although Mr Osborne’s allies insist he is thinking only about the UK’s economic stability, his network of supporters at Westminster are busy trying to work out his political future.

“George’s team have been ringing around taking soundings on the level of support for him,” said one member of the “Friends of George” Tory cadre, a powerful group that includes many ministers.

The feedback has been that Mr Osborne is unlikely to have the support needed to make a run for the leadership, although the chancellor is said not to have taken a final decision.

In a column in the Telegraph yesterday, Boris Johnson, one of the heavyweights behind the pro-Brexit campaign and possibly the country’s next prime minister, cited Mr Osborne’s input as a key reason for the “outstandingly strong” economic fundamentals in the UK.

Mr Osborne’s team, communicating via a pro-Remain WhatsApp group, are considering whether the chancellor’s machine should be deployed in favour of an “anyone but Boris” candidate for the Tory leadership, in order to prevent a win for former London mayor Boris Johnson

Stephen Crabb, the work and pensions secretary, is one option, while Mr Osborne might decide to endorse the more obvious candidature of Theresa May, home secretary, with whom he has scratchy relations.

Mr Osborne would expect to be rewarded for such a move. His friends say a move to the Foreign Office would be the only other job that would appeal to a politician obsessed with history and global affairs, including the rise of China.

Such a move would keep Mr Osborne, aged just 45, at the top table of politics and potentially in the game for a future run at the leadership, with his reputation as a sound steward of the economy still on his CV.

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