British chancellor George Osborne said Britain's vote to leave the European Union was likely to lead to further volatility on financial markets but said the world's fifth-biggest economy would cope with the challenge ahead.
His comments came before renewed falls in shares in Britain's top banks on Monday as fears about the fallout from Brexit sparked a litany of earnings downgrades and sell-offs by shell-shocked investors.
Shareholder anxiety about Britain's decision to quit the European Union escalated despite calls for calm from Mr Osborne following a weekend of political chaos in Britain and the euro zone.
Indeed, Boris. Project Farce has now begun - and you are largely responsible. #EUref https://t.co/1TExKvEvfT
— Nicola Sturgeon (@NicolaSturgeon) June 27, 2016
Barclays, Lloyds Banking Group and Royal Bank of Scotland were among the hardest hit with falls of 11 per cent, 9 per cent and 14 per cent respectively in dramatic early trading that sent the STOXX Europe 600 bank index to its lowest since June 2012.
Trading in Lloyds and RBS shares were temporarily suspended.
Mr Osborne, who was speaking publicly for the first time since Britain voted to leave the bloc on Thursday, admitted that the uncertainty caused by the vote was likely to impact on the public finances but he appeared to rule out an emergency budget before the autumn.
“There will have to be action to deal with the impact on the public finances, but of course it’s perfectly sensible to wait until we have a new prime minister to determine what that will look like,” he said.
“There will be an adjustment in our economy because of the decision that the British people have taken,” Mr Osborne said.
Sterling, which fell more than 8 percent against the US dollar on Friday, trimmed some of its losses on Monday as Mr Osborne spoke.
He said the government had put in place robust contingency plans and there was more action that it and the Bank of England could take.
“Our economy is about as strong as it could be to confront the challenge our country now faces,” he told a news conference at Britain’s finance ministry on Monday.
Contingency plans
Following talks over the weekend 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 in response to further volatility.
Mr Osborne’s future as finance minister has come under question after he was on the losing side in the referendum.
Mr Osborne, who was once the favourite to succeed Cameron, said he would clarify his political future in the coming days.
During the campaign he said he would have to raise taxes and cut spending in the event of a vote to leave the EU.
On Monday, he said the government should wait until the successor to prime minister David Cameron is in place before deciding on how to change its fiscal plans in response to the expected slowdown in the economy.
Mr Cameron said on Friday he would stand down but would stay in the job until his successor was in place in October.
Mr Osborne said it was "inevitable" the economy would have to adjust following the Brexit vote but he would do "everything I can" to make it work.
He said Mr Cameron had given the country time to decide on its relationship with the EU.
Mr Osborne warned it “would not be plain sailing” but said the UK was “equipped for whatever happens”.
He said he had also been in touch with his European counterparts, central bank governors, the managing director of the International Monetary Fund, the US Treasury secretary as well as chief executives of Britain's major financial institutions.
“We were prepared for the unexpected and we are equipped for whatever happens,” he said.
Potential upside
IDA boss Martin Shanahan said on Monday it was too early to determine the extent of the “potential upside” of Brexit for Ireland based on the possibility of international companies relocating to Ireland for future access to the EU.
“Everyone is concentrating on what is happening in the markets at the moment and it will be next week before they start making any long term plan,” he said, referring to the IDA’s 1,200 client firms.
Mr Shanahan told RTE’s Morning Ireland that he does not believe all financial sector jobs will go to Frankfurt, as had been suggested. “Ireland is already punching above its weight.
“Our offering is already resonating. Other jurisdictions change their competitive offering all the time and we can change ours too.”
Agencies