British economy can withstand Brexit shockwaves, Osborne insists
Chancellor George Osborne sought to convince the financial markets this morning that the British economy can withstand the shock of leaving the European Union.
Mr Osborne, in his first public intervention since last Thursday’s referendum, said the UK’s financial system was far stronger now than in 2008 when the global banking crisis sent western economies plunging into recession.
The Chancellor said:
I want to reassure the British people, and the global community, that Britain is ready to confront what the future holds for us from a position of strength.
That is because in the last six years the government and the British people have worked hard to rebuild the British economy.
We have worked systematically through a plan that today means Britain has the strongest major advanced economy in the world.
Growth has been robust. The employment rate is at a record high. The capital requirements for banks are ten times what they were.
Mr Osborne insisted the economy “is about as strong as it could be to confront the challenge our country now faces.”
The Chancellor, who campaigned for Britain to remain in the EU, said the Government would have to accept the democratic decision of the people and move to negotiate an exit package. He continued:
I fully accept the result of the referendum and will do everything I can to make it work for Britain.
It is inevitable after Thursday’s vote that Britain’s economy is going to have to adjust to the new situation we find ourselves in.
He set out three challenges and rejected claims by the Leave campaign that the Government had no con tangency plans for Brexit:
First, there is the volatility we have seen and are likely to continue to see in financial markets.
Those 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.
We have worked systematically with each major financial institution in recent weeks to make sure they were ready to deal with the consequences of a vote to leave.
Swap lines were arranged in advance so the Bank of England is now able to lend in foreign currency if needed. As part of those plans, the Bank and we agreed that there would be an immediate statement on Friday morning from the Governor, Mark Carney.
As Mark made clear, the Bank of England stands ready to provide £250 billion of funds, through its normal facilities, to continue to support banks and the smooth functioning of markets.
And we discussed our co-ordinated response with other major economies in calls on Friday with the Finance Ministers and Central Bank Governors of the G7.
Mr Osborne said he was in regular contact with the Governor of the Bank of England and “we have further well-thought-through contingency plans if they are needed”.
However, the chancellor warned:
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. We are equipped for whatever happens.
And we are determined that unlike eight years ago, Britain’s financial system will help our country deal with any shocks and dampen them – not contribute to those shocks or make them worse.
He warned of a period of uncertainty as “Britain works with its European allies to create a new relationship” and he supported the prime minister’s decision to delay triggering the formal exit process..
Mr Osborne said:
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.
Only the UK can trigger Article 50, and in my judgement 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.
The Chancellor said he had evidence that firms are “continuing to pause their decisions to invest, or to hire people” in the UK following the referendum result.
In a broad hint that he expects to continue in government after the departure of Mr Cameron, the Chancellor said:
Together, my colleagues in the government, the Conservative Party and in parliament will have to determine what those terms should be – and we’ll have to negotiate with our European friends to agree them.
I intend to play an active part in that debate – for I want this great trading nation of ours to put in place the strongest possible economic links with our European neighbours, with our close friends in North America and the Commonwealth, and our important partners like China and India.
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