Pound slumps

Currency collapses 9.1 per cent

THE pound slumped to its biggest daily fall on the stock markets in more than 45 years after Leave surged to victory in the EU referendum.

Britain’s currency collapsed by as much as 9.1 per cent early in the UK – sterling’s worst daily fall on records that date back to 1971.

A narrow Remain vote in Newcastle sent its value against the dollar plummeting below that of Black Wednesday in 1992, when Sir John Major’s Government withdrew from the European Exchange Rate Mechanism (ERM).

It then took another hit within minutes – to $1.43 – after a strong Leave vote in Sunderland.

Shadow chancellor John McDonell said the Bank of England would have to act to prevent even more serious turbulence.

He told BBC News: “I would expect the Bank of England to intervene in the morning.

“Chancellors and shadow chancellors can’t comment on sterling, but what we can do is have a mature approach to this and say whatever the outcome, we will negotiate the best deal we possibly can with regard to our trading partners in Europe and in that way we might give some assurances to the market.”

The pound stabilised slightly following the Sunderland result, but then tumbled further to trade below $1.41. Earlier, as the polls closed, it had risen to $1.50 after Ukip leader Nigel Farage said it looked as though Remain had “edged” the vote.

Joe Rundle, head of trading at ETX Capital, said: “It was a huge swing for the pound – something we virtually never see. The move was bigger than the pound dropped on Black Wednesday. Nervousness is palpable in the markets as there is the potential that assets have been wildly mis-priced. Investors were a little too complacent and if we do see a vote out we will see moves well beyond this.”

Jeremy Cook, chief economist at World First, said: “These moves are concerning and bring back pretty painful memories of 2008.

“The pound didn’t have this bad a day [against the dollar] in the global financial crisis and the moves by the bookies to price Leave as the favourite is killing the pound.”

The pound fell by 4.1 per cent on Black Wednesday when Britain was forced out of the ERM in 1992.

Remain had a 94 per cent chance of victory, according to trading on Betfair just before the polls closed at 10pm. But the odds plummeted to 65 per cent (8/15) as the results poured in, with Brexit on 35 per cent (9/5) and by 2am Leave was the favourite on some exchanges.

A staggering £82million has been wagered on the outcome of the referendum on Betfair, making it the biggest political betting market in the exchange’s history. On polling day alone, £32m was traded.

Earlier in the day, the money markets, bookmakers and betting exchanges all reflected greater confidence in a Remain vote than the pollsters’ neck-and-neck findings.

On polling day, William Hill offered odds of 1/8 on Remain and made Leave a long-shot at 5/1.

The pound had traded strongly against the dollar throughout the day on hopes of a Remain vote. Last week, it fell as low as $1.40 as traders tracked polls suggesting a flagging Remain campaign.

But from June 17, when the campaign was halted after the killing of MP Jo Cox, it rallied strongly, returning to $1.48 – the level it had been trading at a month ago.

The delay halted the momentum that was being built up by the Leave campaign. As the country mourned Remain activist Ms Cox, the public mood had appeared to harden against the Leave campaign.