LONDON // Britain's vote to leave the European Union hit world markets like a bombshell on Friday, sending stocks into free fall, pushing the pound to a 31-year low and sparking fears of a global recession.
David Cameron confirmed he would stand down as prime minister after suffering a devastating defeat in which 51.9 per cent of Britons voted to end the country's 43-year membership of the EU.
The referendum result sent shock waves through international markets, bringing warnings of investment cuts, job losses and global recession.
An estimated US$2 trillion in value was wiped off global stock markets on Friday, Reuters reported.
London's benchmark FTSE 100 index tumbled by more than 8 per cent in early trading, wiping more than £100 billion off the value of the UK's top companies. It later recovered, ending the day down 3.15 per cent. Other global markets suffered, with the Dow Jones industrial average tumbling by 2.8 per cent in the first few minutes of trading.
"We're not forecasting a recession at this stage, but we would say that the risk of recession in the UK is now running at around 35, 40 per cent - very elevated indeed," said Azad Zangana, senior European economist at asset management firm Schroders, in a conference call.
Others went further, with asset manager T Rowe Price Group putting the risk of a global recession at more than 50 per cent.
Mr Zangana said foreign investment in the UK had already been affected by the prospect of an exit from the EU.
"Over time, as the pull-off in investment starts to feed through into a slowdown in jobs growth, maybe even job losses, the household sector will also start to feel the pain," he said.
The declining value of the pound - which fell by as much as 10 per cent against the dollar on Friday before settling at about 8 per cent lower - could also lead to higher import prices and higher inflation, Mr Zangana said.
The Brexit vote result also saw oil prices plummet, with Brent crude down 4.24 per cent at $48.75 a barrel at 1.40pm in New York. Gold prices soared as investors sought "safe haven" assets, with the price on the Comex division of the New York Mercantile Exchange up 4.49 per cent at $1,319.80 an ounce at 1.05pm EDT.
Despite the global shock waves, some said the impact of the Brexit vote was likely to be less dramatic than that of the 2008 financial downturn or sovereign debt crisis that hit Europe in 2011.
"This is a much more modest event ... hence I do expect that the reaction will be more short-lived," said Paras Anand, head of European equities at Fidelity International.
Chris Doyle, director of the London-based Council for Arab-British Understanding, said the path ahead would be "bumpy" and that Britain remained "very divided".
"It's going to be a huge effort just to bring the country back together again after this very bitter and divisive campaign," he told The National.
Mr Doyle said that he did not expect big changes in relations between Britain and the Arabian Gulf and wider Arab world.
"Our relations with the Gulf will probably remain very strong," he said. "There will be some areas though that do change ... If there is an economic downturn in Britain we may not have the resources to fund assistance to Syrians, for example, in the way that we have been hitherto."
Prominent Remain campaigner Richard Reed, the co-founder of the smoothie brand Innocent, of which Coca-Cola took full control in 2013, said he was not surprised to see the markets react so dramatically.
"I'm not predicting doomsday, although if you look at the markets it's pretty doomy," he told The National. "Britain as a country had it all. And now we're going to have a bit less."
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