Britain leaves Europe - 'bloodbath' predicted for financial markets

  • 24/06/2016
Boris Johnson exits a polling station after voting in the Brexit referendum
Boris Johnson exits a polling station after voting in the Brexit referendum

Confounding financial markets and the bookies, the Leave campaign has won the Brexit referendum.

Lead by conservative MP Boris Johnson and UK Independence Party leader Nigel Farage, the Leave campaign won 52 percent of the vote.

As the results came in, the British pound took an immediate hit, plummeting in its largest ever daily fall and hitting a 30 year low against the US dollar.

A former Swedish Prime Minister Carl Bildt noted that even the Zimbabwe dollar was gaining ground against the pound.  He said the result was 'beyond comprehension".

Asian markets have already reacted badly; the Japanese Nikkei is down 8 percent and the Hong Kong Hang Seng index is down 4.5 percent.

Some analysts are now expecting a 'bloodbath' when the London Stock Exchange opens at 7pm New Zealand time.

WHAT DOES IT MEAN FOR NZ?

Labour leader Andrew Little says it will be a difficult period to negotiate.

"Right now the first thing they need to be doing is setting up talks with the UK government to get a free trade agreement with the UK directly, and they've also got to make sure the talks with the rest of the EU for a free trade agreement don't get stalled or diverted in any way."

Britain is New Zealands fifth largest trading partner, we sell more than $3 billion worth of goods and services every year. They drink our wine, eat lamb and come to visit us.

The UK is our fourth largest tourism market.

ASB Chief Economist Nick Tuffley says there is the possibility of a recession in Britain and that could bring some headwinds for the NZ economy.  The longer term knock-on effect and global indecision will be a slight negative.

Britain now has two years to negotiate its exit from the EU. 

What that will look like no-one knows. Will New Zealand keep its trade deals with the EU, will it have to re-negotiate a free trade deal  with Britiain, and how soon could it happen?

NZIER deputy Chief Executive John Ballingall earlier told Newshub that no-oneknows what a post-Brexit landscape could look like but the uncertainty could wipe $190m of New Zealand's export earnings to the UK.

Most of New Zealands business is done with Australia, China and the United States of America, and a heavy weighting towards Asia.

The New Zealand Stock Exchange has been trading down this afternoon, down by 1.7 percent on the Brexit news.

Newshub.

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