Aftermath of UK referendum result – Goldman Sachs

Research Team at Goldman Sachs, notes that the UK voted to Leave the EU as the 'Leave' won UK referendum on EU membership, with 51.9% of the vote.

Key Quotes

“Precipitating David Cameron's decision to stand down as Prime Minister. Following the referendum result, Mr. Cameron announced that he will stand down as Prime Minister by the time of the Conservative Party conference in October. Under the rules governing the selection of the Conservative Party leader, Conservative MPs choose a short-list of two candidates. The Party membership then chooses its leader (and by implication the Prime Minister) from these two candidates.

Exit process likely to be formally activated in the autumn. In line with the comments of most leading UK politicians, Mr. Cameron stated that he interprets the referendum result as "an instruction that must be delivered". He implied that his successor should activate the formal process of exit (via Article 50 of the EU Treaty), thereby leaving some ambiguity on the timing, while pointing implicitly to the autumn.

BoE stands ready to support market functioning. As we expected in the event of a Leave decision, BoE Governor Carney stated that the BoE will "support the functioning of markets", including through the operation of its normal liquidity facilities. The Governor signalled that an assessment of whether a further policy response is needed will be made "in the coming weeks". We reiterate our view that we do not expect an emergency rate cut from the BoE, and describe the package of policy easing measures we expect: credit easing at the July 14 MPC meeting, followed by a rate cut in August.

ECB statement signals readiness "to provide additional liquidity, if needed, in euro and foreign currencies". The ECB has released a statement in the aftermath of the referendum outcome that it is "closely monitoring financial markets" and is in close contact with other central banks and with the private sector (in particular, banks that it supervises). It also signalled readiness "to provide additional liquidity, if needed, in euro and foreign currencies". Scandinavian central banks have issued similar statements.”