Closed Brexit live – Cameron in Brussels as leadership race heats up

EU Council meeting after British referendum to leave the EU

David Cameron is at his final EU summit in Brussels today, where he vowed that the UK would not turn its back on its European allies.

But while German leader Angela Merkel wants to ensure the UK is given time to decide how to exit, the European Parliament is pushing for a swift end to uncertainty.

Back in the UK, despite overwhelmingly losing a vote of no-confidence from his fellow Labour MPs, Jeremy Corbyn has refused to step down as leader of the opposition.

Key points

  • The Tory leadership battle is underway, with Johnson and May the frontrunners. Work and pensions secretary Stephen Crabb is also in the frame.

  • George Osborne warns of “prolonged economic adjustment”, says spending cuts and tax hikes needed

  • Sterling edges back after hitting a 30-year low on Monday, stocks bounce

  • Jeremy Corbyn has lost a vote of no confidence vote from his fellow Labour MPs

  • S&P downgrades the UK two notches, stripping the country of its final AAA rating

  • Nicola Sturgeon has launches a diplomatic drive to secure Scotland’s post-Brexit place in the EU

You can read yesterday’s coverage here.

Good morning. Sterling recovered slightly in Asia morning trading today, and the futures markets are signalling a more upbeat start to trading when the UK markets open in about 10 minutes’ time.

We will be bringing you the latest on market movements throughout the day, as well as what is happening in London – where Labour leader Jeremy Corbyn is likely to face a vote of no confidence — and Brussels — where Prime Minister David Cameron is set to sit down with other European leaders for the first time since the UK voted to leave the EU last Thursday.

This morning’s FT front page highlights yesterday’s sell-off in sterling and financial stocks:

With nominations in the Conservative leadership contest set to open tomorrow, health secretary Jeremy Hunt appears to be throwing his hat into the ring, setting out his vision for a post-referendum Britain in the The Daily Telegraph .

Read more here.

For decades the England football team has provided some of the best metaphors for national decline, but never has their timing been better than Monday night in Nice.

Read Simon Kuper’s full review of England’s night of humiliation here

Emoticon FTSE 100 opens up +1.6%, FTSE 250 gains +2.7%

Meanwhile, chancellor George Osborne, long a favourite to replace David Cameron in Number 10, has ruled himself out for the role, writing in The Times that he is “not the person to provide the unity [the Conservatives need] at this time”.

Read more here.

Today the FT calls on Jeremy Corbyn to step down.

Watching Mr Corbyn as leader has been a dismal experience from start to finish. What is now at stake is not the political survival of a single individual, but the fate of one of the two main parties that has dominated British politics for the past century.

But removing him is likely to prove difficult, despite a mass revolt in his shadow cabinet.

So with George Osborne out, who are the runners and riders to replace Prime Minister David Cameron at the helm of the Conservative party?

Political betting guru Mike Smithson looks to the betting markets this morning, showing that online gambling marketplace Betfair favours Boris Johnson and Theresa May.

Some of the early gainers in London:
Barclays +7.5%
RBS +5.6%
Lloyds +6%
Redrow +8.4%
Bovis Homes +8.2%
Prudential +5.2%

What should we watch out for in Brussels? Societe Generale’s fixed income team has this:

If there is a strong defence by EU leaders of the free movement of labour into the UK, the UK Brexiteers will be left with very tough choices. If not, then the way is open in good time towards striking some kind of “dirty deal” with the UK that will allow it keep its financial passport. That would be great for risk, if disastrous for EU principles.

Chancellor George Osborne is speaking now on BBC Radio 4′s Today programme.

“We are in a period of prolonged economic adjustment for the UK,” Osborne, who campaigned for the UK to “Remain” in the EU, said when asked about the market sell-off seen since the referendum.

Yesterday, the man who would be prime minister — Boris Johnson — didn’t make it to the House of Commons for David Cameron’s address and Q&A on the Brexit vote.

But he has been spotted this morning leaving his house in north London.

If you’re a fan of “Brexit won’t actually happen” type stuff, then the New Yorker has this for you:

For the sake of Britain, and also of Europe, I hope that my countrymen and countrywomen rediscover their modest virtues before it’s too late. Watching from afar, it’s clear that a mistake has been made, and that it’s time for a rethink.

Jeremy Hunt, another possible contender for Conservative leader, has told the BBC he favours a “Norway-plus” relationship with the European Union, with access to the single market but also controls over the free movement of people, which the Norwegians do not enjoy.

Mr Hunt, who says he is “seriously considering” his candidacy for the Conservative party leadership, acknowledged this sort of arrangement was “not on the table” from European Union but he said: “I think there is a way it could be.”

Mr Hunt said: “I want us to be strong, proud outside the EU, with sensible border controls.”

More on the “Brexit won’t happen” theory, this time from human rights lawyer Geoffrey Robertson in the Guardian:

A law that passed last year to set up the EU referendum said nothing about the result being binding or having any legal force. “Sovereignty” – a much misunderstood word in the campaign – resides in Britain with the “Queen in parliament”, that is with MPs alone who can make or break laws and peers who can block them. Before Brexit can be triggered, parliament must repeal the 1972 European Communities Act by which it voted to take us into the European Union – and MPs have every right, and indeed a duty if they think it best for Britain, to vote to stay.

It is being said that the government can trigger Brexit under article 50 of the Lisbon treaty, merely by sending a note to Brussels. This is wrong. Article 50 says: “Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements.” The UK’s most fundamental constitutional requirement is that there must first be the approval of its parliament.

Newly-minted shadow health secretary Diane Abbott has just been on BBC Radio 4, defending Labour leader Jeremy Corbyn.

Abbott, a longtime friend of Corbyn, said she expected the Labour leader to lose a vote of no confidence among MPs later today — but added that she thought Corbyn would win a second leadership contest with the backing of party members.

“Party members are going to look dimly on the people who have chosen to unleash this kind of mayhem,” Abbott said.

Abbott also questioned the validity of today’s confidence vote, which is set to be conducted with a secret ballot.

“You wouldn’t run a parish council like that,” Abbott said.

Local elections in the UK are held under a secret ballot.

National Front leader Marine Le Pen has written in the New York Times , saying the UK referendum was “the people’s first real victory” and will spark a “People’s Spring” of uprisings throughout Europe.

“Brexit may not have been the first cry of hope, but it may be the people’s first real victory. The British have presented the union with a dilemma it will have a hard time getting out of. Either it allows Britain to sail away quietly and thus runs the risk of setting a precedent: The political and economic success of a country that left the European Union would be clear evidence of the union’s noxiousness. Or, like a sore loser, the union makes the British pay for their departure by every means possible and thus exposes the tyrannical nature of its power. Common sense points toward the former option. I have a feeling Brussels will choose the latter.”

Read more here.

Ukip’s Nigel Farage has also been busy on his typewriter. He’s written a piece for The Times explaining why free movement of labour — i.e. something that would be necessary for a ‘Norway-style’ settlement with the EU — is not acceptable.

In my view a net migration range of 30,000 – 50,000 net per year would be an ambitious and sensible level to aim for. It would mean that companies in this country would need to invest more in training British youngsters rather than relying on cheap foreign labour. Yes, in some cases, this means paying British workers higher wages. It would also mean that where there are genuine skills shortages we would retain the ability to plug those gaps effectively.

Sadiq Khan, who was elected mayor of London in May, will today call for more powers for the capital, saying London needs “more autonomy in order to protect London’s economy from the uncertainty ahead, to protect the businesses from around the world who trade here and to protect our jobs, wealth and prosperity”.

Khan, who campaigned for “Remain”, will say the central government should “move fast” on devolving more powers to City Hall.

“We can’t hang around for the outcome of the negotiations before we give Londoners more control”.

And despite social media campaigns calling for an independent London, Khan will dismiss the suggestion, saying: “As much as I like the idea of a London city state, I’m not seriously talking about independence today.”

When the referendum result was announced on Friday morning, the UK’s listed housebuilders were the worst-hit. Some share prices plunged more than 40 per cent in minutes.

They’ve since bounced, but questions over the viability of London’s property market — both residential and commercial — are set to hang over the sector and the economy.

The FT’s Judith Evans has this:

Planned property developments including a 62-storey City skyscraper and two London projects by the Queen’s property company, the Crown Estate, have been called into question by the UK’s vote to leave the EU.

Education secretary Nicky Morgan is also reportedly gunning for the top job in the Conservative party, setting out her stall on Conservative Home this morning.

“Under Cameron, we set about extending the appeal of the Conservative Party, and reached out to people who had never voted for us before. I know that this appeal is part of the reason I was able to be successful in Loughborough.

“The next leader needs to be able to further this approach – heeding the lessons of last Thursday’s vote; reaching out to the disenfranchised and to those who feel abandoned by their traditional Labour Party; making it clear that BME voters have a home in with us; having horizons that extend north of Watford, and convincing those who want Britain to continue to be a modern outward facing nation that the Conservatives are the party for them.”

Read more here.

Our Scotland correspondent Mure Dickie has an update on the political goings-on today north of the border.

The Scottish parliament will this afternoon debate the implications of Brexit and is expected to pass by a hefty margin a motion intended to strengthen Nicola Sturgeon’s hand in the first minister’s negotiations with UK and EU authorities.

The motion submitted by Ms Sturgeon does not mention the possibility of seeking independence from the UK. Instead it welcomes the Remain vote in Scotland, assures EU citizens they are welcome and valued in Scotland, and mandates the government to hold talks with the UK and EU “to explore options for protecting Scotland’s relationship with the EU [and] Scotland’s place in the single market”.

The Scottish National party, Labour and the Liberal Democrats have said they will back the motion and the Scottish Greens are expected to join them, ensuring a strong majority. The parliament session starts at 2pm with the vote expected around 5pm.

In Brussels, the European Parliament is meeting in a special session to discuss the UK vote to leave the EU.

European Parliament President has said EU policymakers “regret” the referendum result, but that the will of British voters “must be respected”.

Read more on fastFT here.

Amid all the dire warnings about the economy, at least one major investor in the UK is trying to sound a bit more positive. This via the FT’s Simeon Kerr in Dubai:

Kuwaiti Finance Minister Anas al-Saleh said on Monday evening that the Gulf Arab kingdom’s investments in Britain were “high-quality and long-term”, state news agency KUNA reported.

His message was delivered to a cabinet meeting, which discussed the impact on Kuwait of the British vote.

European Central Bank president Mario Draghi has been speaking this morning at the ECB’s annual forum in Sintra, Portugal.

Draghi, who said yesterday that he felt “sadness” at the UK’s vote to leave the EU, made no mention of Brexit in today’s comments, the FT’s Lucinda Elliott reports.

Instead, the ECB president stuck to the script of his prepared remarks, arguing that the pursuit of aggressive monetary policy from the world’s central banks has created negative spillovers for the global economy.

Read more on fastFT here.

Bank of England governor Mark Carney and US Federal Reserve chair Janet Yellen had also been scheduled to speak in Sintra. But they pulled out of the conference yesterday, choosing to stay back and address market jitters at home.

Theresa May, the current home secretary, has just nudged ahead of Boris Johnson in some of the bookmakers’ betting odds to replace David Cameron as leader of the Conservative party. Stephen Crabb has come in a bit too, but May vs Johnson looks to be the main event.

More on the contest here.

Meanwhile, in the Labour party, yet another frontbencher has pulled out of Jeremy Corbyn’s frontbench.

Andy Slaughter, the Labour MP for Hammersmith, just posted his resignation letter on Twitter, saying he is leaving his post as shadow justice minister.

Labour MPs are expected to participate in a vote of no confidence in an attempt to unseat Corbyn later today.

President of the European Commission Jean Claude Juncker is speaking to the European parliament.

Applauded as he commented that the referendum result must be respected, he turned towards the UK Independence Party MEPs, including Nigel Farage. Switching from French into English, he wagged his finger: “That’s the last time you are applauding.”

“And to some extent I am really surprised you are here” Juncker said.

“It’s a pleasure,” one MEP replied.

Mr Juncker went on: “You were fighting for the exit. The British people voted for the exit. Why are you here?”

Despite the hostile tone of Mr Juncker, the EC president and Ukip’s Nigel Farage seemed to be getting on quite well before his address.

The European Commission Representation in Ireland has responded to reports that English was to be taken off the list of official EU languages, in essence saying “c’est faux!”

We note the media reports stating that in the event of a UK withdrawal from the EU, English would cease to be an official language of the EU.

This is incorrect. The Council of Ministers, acting unanimously, decide on the rules governing the use of languages by the European institutions. In other words, any change to the EU Institutions’ language regime is subject to a unanimous vote of the Council, including Ireland..

Mr Juncker has just finished speaking to the European parliament. He told MEPs there must be no secret negotiations with British officials on a new deal for the UK. He said he had banned his fellow commissioners and commission officials from contacting the British side until the article 50 process is triggered.

“We can’t have secret attempts to take the British government aside for informal secret negotiations. That can’t happen.”

“We cannot be embroiled in lasting uncertainty”

He called for “clarity” from the British on the next steps. “I would like our British friends to tell us what they want now.” But he added:

“It is we who decide what must happen not just those who would wish to leave the European Union.”

Analysts at Credit Suisse have sent out a handy guide to clients with events to watch as the referendum fallout continues over the next 72 hours.

Tonight: Prime Minister David Cameron is due to address EU leaders at a dinner in Brussels. He will leave after the dinner, and will therefore not take part in any talks among EU leaders tomorrow.

Tomorrow: Nominations are set to open in the Conservative leadership contest.

Thursday: Nominations in the Tory contest are due to close.

Thursday also kicks off a host of economic data releases for June and the third quarter, with current account balance and consumer confidence figures expected.

Meanwhile, PMIs will be posted on July 1, and the REC/KPMG report on jobs for July will come out on July 8.

The latest RICS residential market survey is due on July 14, and the Confederation of British Industry will publish its industrial trends survey for July on July 21.

The British Chambers of Commerce’s quarterly economic survey is expected on July 12.

It’s business as usual in the House of Commons this morning. Well, almost.

MPs are heading back to work and the Treasury committee has started taking evidence from Andrew Turnbull, former head of the civil service, the FT’s economics editor Chris Giles reports.

He is not sounding reassuring on the capacity of the UK government to negotiate Britain’s exit from the EU.

“Politics is completely broken,” he says. Civil service needs politicians to set the agenda.

He recommends perhaps a long delay before triggering Article 50, perhaps until after the French and German elections in 2017.

If you want to know more about Theresa May – quite possibly the next UK prime minister – then here’s an in-depth profile of her from the FT Magazine. It was written in July 2014, but looks rather prescient now.

Ukip leader Nigel Farage may have been booed in the European Parliament this morning, but MEPs gave a warm welcome to at least one UK politician today.

MEPs gave the UK’s outgoing European Commissioner Lord Hill a standing ovation.

The BBC has posted a short clip of the moment here:

Lord Hill said on Saturday that he would be resigning from his post.

In an interview with the FT’s Brussels bureau chief Alex Barker on Sunday, Lord Hill warned that the City of London was likely to be ruled by Franco-German interests.

Read that full interview here.

It is now Nigel Farage’s turn to address the European parliament. The leader of the UK Independence party has called for a “grown up and sensible” approach from the European Union to negotiations on a new deal for the UK following last week’s referendum.

He said the vote had offered ” beacon of hope to democrats” across Europe.

But he warned if the EU wants to cut off its nose to spite its face by insisting on unfavourable terms, the consequences are “far worse for you than for us”.

Mr Farage said when he became an MEP 17 years and said he was fighting for a UK exit, the parliament had laughed at him.

“You all laughed at me and I have to say you’re not laughing now.”

He said the European Union was “in denial” about the failure of the Euro currency and its disastrous immigration policies.

He then resorted to outright insults of his fellow MEPs.
“None of you have ever done a proper job in your lives, or worked in business, or worked in trade or ever created a job,” he said to jeers and boos.

At this point Martin Schulz, the parliament president, intervened to ask MEPs to stop behaving like UKIP.

“You are acting like UKIP acts in this chamber. Don’t imitate them.”

Royal Bank of Scotland chief executive Ross McEwan has looked to reassure RBS employees this morning, after shares in the state-backed bank closed down 15 per cent yesterday.

Despite the noisy fallout from the vote, many of the fundamentals remain true. Our view as a bank is that the UK remains a large, well developed economy with good long-term prospects. It’s our home market and our job as a leading bank here is to help it succeed.

Read the full memo on fastFT here.

The FT’s economics editor Chris Giles has filed these updates from the Treasury Select Committee’s ongoing evidence session:

David Miles, former member of the Monetary Policy Committee, says everyone should be careful about being certain about the long term effects of Brexit, but is gloomy about the short term. He says the good news is that banks are safer than in 2008 and that inflation is currently low, but he said warnings of a hit to the public finances from uncertainty were probably underplayed before the vote so he urged the government to abandon its target to run a surplus in the public finances by the end of the decade. He said the level of sterling was appropriate at the moment.

Stephen King of HSBC said the fall in sterling so far was consistent with the pound being worth only $1.20 by the end of the year. He worried that a cheaper pound might help Britain’s balance of payments, not through higher experts, but “by raising inflation relative to wages, you end up with a big squeeze in take home pay, consumption and consequently imports”.

What to do with Michael Gove, the increasingly hard to track down Leave campaigner, now that David Cameron is on his way out? The FT’s Sebastian Payne has one idea, but there’s a catch (highlighted).

National Front leader Marine Le Pen leaped to Nigel Farage’s defence this morning in the European Parliament, asking “Remain” supporters to put away their “sulky faces” and “rejoice” because a “glowing future” awaits the UK, the FT’s Lucinda Elliott writes.

Le Pen, the leader of the National Front in France, stoked further so-called “Frexit” fears as she insisted the EU must respect the will of the British people to leave.

Le Pen already got attention earlier this morning for her op-ed in the New York Times calling for a “People’s Spring” in Europe.

Here’s what Banx, the FT’s cartoonist, thinks of the referendum result.

After Nigel Farage and Marine Le Pen, the European Parliament has now heard a very different verdict on the referendum result from Scottish nationalists who said that Scotland voted overwhelmingly to “Remain” in the EU and should be treated separately to the rest of the UK.

SNP MEP Alyn Smith pleaded with European leaders to show “cool heads and warm hearts”, adding, “Please remember this. Scotland did not let you down. Please I beg you. Chers collègues. Do not let Scotland down now.”

German chancellor Angela Merkel has warned the UK that there will be no “cherry picking” in its Brexit negotiations, in her toughest response yet to the “Leave” campaign’s hopes of securing access to the EU’s internal market whilst limiting freedom of movement, the FT’s Stefan Wagstyl reports from Berlin.

In a firm speech to the Bundestag, Ms Merkel spelt out the EU’s internal freedoms were indivisible. If Britain, like Norway, wanted access to the internal market then, like Norway, it would have to accept freedom of movement.

Read more from Stefan on fastFT here.

The Guido Fawkes blog has just published Nigel Farage’s victory speech in the European Parliament

The FT’s Attracta Mooney has filed a report on the poor performance of funds investing in medium-sized listed companies in the aftermath of last week’s referendum result.

In total, three of the five worst-performing funds on Friday were invested in medium-sized listed companies. The Schroder UK Mid 250 fund lost 9.9 per cent, while the Axa Framlington UK Mid Cap fund was down almost 9.5 per cent.

The funds were hit after the FTSE 250, the index of medium-sized companies, dropped following the vote in favour of a British exit — or Brexit — from the UK. The FTSE 250 is down more than 11.5 per cent since the result was decided.

Jason Hollands, managing director of business development at Tilney Bestinvest, the UK wealth manager, said the performance losses for mid-cap focused funds reflected the “uncertainty over the impact [of Brexit] on the UK”. “Growth forecasts have started to be aggressively culled back,” he added.

Full article here.

The FT’s Michael Mackenzie highlights what to watch in the markets on day three after Brexit, with relief at last for equities. But with a recovery after a sharp decline fairly typical, will the bounce be that of a dead cat variety?

The Bank of England has pumped £3.1bn into British banks since voters​​ backed the UK leaving the EU last week​.

This is the last of three scheduled special auctions announced before the UK referendum and designed to quell any panic about the state of the country’s lenders.

Read more on fastFT here.

The view from Germany of the impact of Brexit on the City – the UK’s financial district

We’ve got more in the FT from David Allen Green — the legal expert who believes Article 50 may never be triggered. His piece from last night here.

The news that Brexit policy will be overseen by the Cabinet Office shows the lack of urgency. The Cabinet Office is not taken seriously as a government department. It is significant that neither the Treasury nor the Foreign Office are taking the lead, and it is instead being delegated to a small department with little weight domestically and little influence abroad.

Another Labour resignation letter to add to the pile.

This one is from Alan Whitehead, who was until today shadow energy and climate change minister.

WPP chief executive Martin Sorrell wrote to the bosses of his UK companies on Friday, saying he was “desperately disappointed” by the referendum results.

Full memo below, via the FT’s digital media correspondent Robert Cookson.

Obviously from a personal point of view I am desperately disappointed by today’s result. It’s ironic, to say the least, that on the day the six holding company CEOs launched Common Ground with Ban Ki-moon at the Cannes Lions Festival, the UK should vote effectively for isolation. It’s also ironic that our strategy is based, in part, on the importance of horizontality or, put more elegantly, working together for the benefit of our clients.

What are the implications of this decision? I wish we knew all of them – but they will include demands for more referenda in the EU itself and in the UK. In addition, there is no doubt in my mind that GDP growth rates will slow in the UK, the EU, the US and therefore the world.

However, if we pursue our strategy and implement it more strongly and in a more timely manner, we will continue to grow as effectively in the future as we have done in the past. This means a continued focus on fast-growth markets, which already account for a third of our business (and we want to be almost half of our business); a continued focus on digital, already 40% of our business (and also targeted to be almost half); and a continued focus on data.

Inevitably, also, this means a greater focus on key Western Continental European markets. Germany, France, Italy and Spain are four of our top ten markets and we will need to increase our influence there even further.

I believe our UK business will continue to grow – though, frankly, not as fast as previously, at least in the short term. Nonetheless we will continue to consolidate our position in that market and there will be increased demand for people, not any reduction.

If you are as concerned as I am personally, do not, however, be dispirited. Just put on your tin hat and deploy your stiff upper lip and focus on implementing our strategic approach. I have already recovered from my post-referendum depression and am more determinedly focused on the future than ever.

Prime Minister David Cameron has arrived in Brussels, where he is due to address EU leaders at a dinner tonight.

Though it looks like he has already had one awkward encounter.

This from European Commission President Jean-Claude Juncker:

Bloomberg’s Isobel Finkel has been examining Boris Johnson’s recent claim that the pound – despite its tumble – is “higher than it was in 2013 and 2014″. The results are quite funny.

The pound is much stronger, since 2013, against the Ukranian hryvnia, Kazahkstan’s tenge, and Mozambique’s metical — yet that may owe more to localized problems (war, devaluation, and a commodity rout) than reflect any kind of confidence in the U.K. economy.

The Guardian reports that pro-Remain rallies planned around the UK later today have been cancelled because of safety fears:

More than 2,000 people were planning to attend the Manchester Stays rally, due to be held in Albert Square on Tuesday evening.

But organisers have cancelled the event, explaining the “safety of all individuals cannot be guaranteed”.

Pro-remain rallies in London and Oxford have also been abandoned and a protest in Liverpool has been postponed to next week.

MPs are already lining up behind candidates to replace David Cameron, even before nominations open in the Conservative leadership contest.

The FT’s Sebastian Payne reports that Jacob Rees-Mogg is lining up behind Boris Johnson, saying the former mayor of London is “best placed to carry out renegotiations with the European Union”.

George Soros made his name betting against the pound. Now it seems he’s made money by betting against Britain’s place in the EU. This from James Shotter in Frankfurt:

George Soros placed a multimillion-euro bet that Deutsche Bank’s shares would plummet in the wake of the UK’s decision to leave the EU, as hedge funds looked for ways to profit from the market turmoil following the vote.

The veteran investor, who famously made $1bn betting against the pound in 1992, took a short position of 0.51 per cent in Deutsche’s stock on Friday — the day after the vote — via his investment vehicle, Soros Fund Management, according to a regulatory filing. The bet equates to about 7m shares.

Here’s what Deutsche Bank shares have done over the past few days.

You can read the full story here.

German chancellor Angela Merkel could be Britain’s saviour as the UK unravels its relationship with the EU, the FT’s Alan Beattie writes.

The best news of a black week was that Angela Merkel, the German chancellor, is assuming a dominant role in the EU’s response to the Brexit result. What Europe needs now is a period of paralysis at the centre, and Ms Merkel is just the person to provide it.

The chancellor is a narrowly effective politician. She rarely moves rapidly to get ahead of a fast-moving issue, as exasperatingly seen during the Greek financial crisis. But when a situation calls for constructive delay and calculated dithering, she is a world beater. Germans have invented a verb, merkeln, meaning to postpone decisions indefinitely. While lesser politicians instinctively look for a rapid solution to problems, Ms Merkel specialises in finding previously uncharted stretches of road down which a can may be kicked.

Never has a talent for merkeling been in demand more than now. The EU starting exit talks either formal or informal with the UK at this point would be disastrous, forcing hasty decisions to be taken on a rushed timetable and bundling Britain prematurely out of the union.

Read Alan’s full take here.

George Osborne is talking to business leaders in London. He says in the negotiations with the European Union on the terms of exit, the UK should seek the closest possible economic ties with the EU to allow trade in goods and services that is “as free as possible.”

“That is where I think the country should head”, he said

He acknowledged there were adjustments in financial markets, and he said it was his task and that of Bank of England “to make sure there is no disorder in the market”.

He said once it is clear what the plan for exit is, “some of that uncertainty will start to lift”.

But he said “until we are clear about that model we should not trigger the article 50 that begins the process of exiting the European Union.”

The FT’s Lucinda Elliott observes that the chancellor chose to compare the referendum to a battle, and the smoke, he said “is only beginning to clear from the battlefield”.

The chancellor went on: “Business does not like uncertainty. We have clarity in the result of the vote on Thursday. Now we need to arrive at clarity with our relationship with the EU. We were not united in that respect, and what the new relationship with our allies should be.”

He said he was not the figure to unite the Conservative party, and thus he had decided not to run for the leadership. ​”The Conservative party was divided on the referendum, I don’t think someone who was so prominent in the campaign , as I was, could realistically bring the party together.”

More complications for the planned merger of London Stock Exchange and Deutsche Börse. Despite a statement last Friday after the Brexit vote that they believed the deal was still a goer, doubts have persisted. Now the German financial regulator has come out against a planned London HQ for the business:

(Reuters) – The head of German financial market regulator Bafin on Tuesday came out against London as the main base for a merged group combining London Stock Exchange and Deutsche Boerse.

“It is hard to imagine that the most important exchange venue in the euro zone would be steered from a location outside the EU,” Felix Hufeld told a press briefing on the margins of a conference on financial technology.

Bafin answers to Germany’s Finance Ministry. Although it cannot veto the deal, its opinion is influential.

Asked about euro-denominated trading in London after Britain’s departure from the European Union, Hufeld said such trading should move to the EU and that it could take place in Frankfurt.

“I would see this as a significant political goal to think about steps to encourage this. It cannot be politically smart for a significant amount or a majority of euro-denominated trading … to take place outside the European Union.” (Reporting by Jonathan Gould; Editing by John O’Donnell)

BuzzFeed’s Jim Waterson has discovered what he believes to be the first use of the word “Brexit” on Twitter. It relates to this blog post, written in May 2012, titled – Stumbling towards the Brexit: Britain, a referendum, and an ever-closer reckoning.

It makes for a fascinating read.

A referendum that says no ends 56 years of British foreign policy. So, since there is no Plan B, the status quo is always best.

But referendum talk may become a self-fulfilling prophesy because politics will always trump policy. The Tories see a way to dish the kippers and Labour sees a way to get back their lost white working classes. In the tussle for power in 2015, diplomacy can go hang.

A reported increase in racist incidences since the Brexit vote has draw a strong statement from Zeid Ra’ad Al Hussein, the UN commissioner of human rights

“I am deeply concerned at reports of attacks and abuses targeting minority communities and foreign citizens in the United Kingdom over the last few days. Racism and xenophobia are completely, totally and utterly unacceptable in any circumstances. I urge the UKauthorities to act to stop these xenophobic attacks and to ensure that all those suspected of racist and anti-foreigner attacks and abuses are prosecuted.”

Prime Minister David Cameron has made his public first comments ahead of the European Council in Brussels, telling reporters:

“I’ll be explaining that Britain will be leaving the European Union. But I want that process to be as constructive as possible, and I hope that the outcome can be as constructive as possible. Because of course, while we are leaving the European Union, we mustn’t be turning our backs on Europe.

“These countries are our neighbors, our friends, our allies, our partners. And I very much hope we will seek the closest possible relationship in terms of trade and cooperation and security because that is good for us and that is good for them.”

The blast to global markets on Friday (a record-breaking burst of volatility, let’s not forget)​ is at least cooling into a more localised issue, ​reports Katie Martin on fastFT.

Analyst Bilal Hafeez at Nomura points out that at the end of last week, pretty much every market on the planet was tracking sterling. At one point, US stocks were the most closely correlated to the Queen’s pound.

Read the full take ​here.

Sir Richard Branson’s Virgin Group has called off a deal to buy a UK company employing 3,000 staff, as he warned of the impact on jobs and investment of a Brexit.

Sir Richard told ITV’s Good Morning Britain that Virgin Group had lost a third of its value as a result of the referendum outcome, but he later clarified that he was referring to the share price slide at Virgin Money since Friday, the FT’s business editor Sarah Gordon reports.

Virgin Money shares have fallen from £3.65 on Thursday to £2.15 today.

Read more here on fastFT.

It looks like the 27 (i.e. the current 28 minus the UK) members of the EU will be meeting up again in Bratislava in September.

The worry in the City of London is real. This is one striking account on by an anonymous senior salesperson at a major US bank:

“I’ve been working in banking for 20 years in London and never witnessed so much anxiety from the international community living in the City. This goes beyond the Lehman default period and it affects people way beyond the finance industry.


When I talk to colleagues, there are two key things on their minds. 1) Will I lose my job and/or have to move abroad? 2) Will my house (which took me so long to buy) collapse in value?

Will jobs move out of London? Personally, I think there will be only 1,000 to 2,000 front office jobs that really NEED to be relocated to Paris, Frankfurt and Dublin over the next 24 months. Need may not be the main driver, however. As various people have pointed out, many firms will take the opportunity to move far more people than necessary into lower cost areas.

More here

More from the FT’s Mure Dickie in Edinburgh:

SNP leader Nicola Sturgeon will visit Brussels on Wednesday to meet Martin Schulz, kicking off her diplomatic drive to find a way to secure Scotland’s place in the EU after last week’s Brexit vote.

In yet another scathing letter from a Labour MP, Chris Evans has urged Jeremy Corbyn to resign as party leader while accusing shadow chancellor John McDonnell of “relish[ing] seeing the party in disarray”.

“The hypocrisy of being threatened with deselection every time myself, or one of my colleagues, has disagreed with you is beyond belief given your and John’s past record in the House. But this nastiness has come to surround and define your tenure and we witnessed just recently your active encouragement of it.”

Evans has published the full letter on Twitter.

The results of a no confidence vote by MPs against Corbyn are expected around 5pm today.

European leaders continue to arrive for the European Council meeting, due to start later today.

Taavi Rõivas, the prime minister of Estonia, has just told reporters that Europe should “keep calm and carry on” in the face of Brexit.

“We as European leaders cannot stay shocked, we need to keep calm and carry on,” he said.

“Our future talks with the UK should not be about revenge. UK will always remain an important European country politically, economically and security-wise. For example, the close EU-NATO co-operation and Western unity became even more important as a result of the referendum.”

UK Prime Minister David Cameron is due to address EU leaders at a dinner in Brussels tonight.

What Brexit will mean for UK jobs? The FT’s employment correspondent Sarah O’Connor writes on the three lessons learned from the 2008 financial crisis.

Luxembourg prime minister Xavier Bettel has warned that the UK’s choice is binary:

“Married or divorced, but not something in between.”

“We are not on Facebook, with ‘It’s complicated’ as a status.”

Norway is the way forward for the UK. So argues Wolfgang Münchau in an FT op-ed just up. He says European Economic Area membership akin to what the Nordic country has is the least economically damaging course for the UK to take.

The situation in Britain is messy but the way forward is not. There are, in fact, few alternatives to choose from. The most sensible one is membership of the European Economic Area, otherwise known as the Norway option. This gives countries full access to the single European market, albeit with no say in EU politics.

It is the best that former Remain supporters can hope for. Many of them are backing the idea of another referendum. I can think of no single measure that would produce more acrimony, division and economic damage than a decision to ignore a democratic vote. The Remainers are still trapped in the second of the five stages of mourning: the anger phase. The first stage is denial, which is where they were during the campaign: they were in denial of the possibility that the other side might win; and of the political disaster of the Project Fear campaign.

More here

What was the first thing you did on Friday morning after you saw the Brexit vote? According to jobs website Indeed, there was a sudden spike on Friday in UK-based users looking for a job overseas. Here’s its chart of the share of UK users searching for jobs in the rest of the world:

Ireland was particularly popular:

Job search traffic also increased from EU countries to Ireland, at the expense of usual EU-to-UK job search traffic, according to Indeed.

Apparently Indeed saw the same thing happen in Greece in 2015. Here is Mariano Mamertino, the jobs site’s economist for EMEA:

We see a striking resemblance in post-Brexit job search patterns with those following the Greek referendum in 2015. The share of job seekers looking for opportunities outside of the UK in European countries doubled in the 48 hours that followed the announcement of a Brexit, just as it did for Greece.

These could be early signs of British job seekers’ collective vote of no confidence. Given how close the EU referendum vote results were, this is perhaps unsurprising. UK employers’ loss is Ireland’s gain, with a significant spike of inbound searches from the EU countries — could Ireland overtake the UK as a leading talent magnet?

(c) EPA

Because there is normally a lag of at least a month in economic data, economists still do not have a clear picture of what momentum the UK economy had going into the Brexit referendum.

While there is clear evidence that business spending had been put on hold, the picture from consumers was much more mixed.

As consumer spending has been one of the driving forces behind the recovery any slowdown here really matters.

Well, there is a new piece of the data jigsaw out this afternoon from Lloyds Bank, which has just released its May spending data. It records that essential spending fell again in May – though the pace of decline slowed.

Lloyds reports people spent 0.4% less on essentials (such as food, drink and fuel) year-on-year. This compared to falls of 0.9% in April, 0.6 % in March and 0.8% in February.

This fits with the picture seen from retail sales data: while sales volumes remain high, the value of goods sold is flat, due to cheap fuel and the supermarket price war.

Do consumers have enough disposable income to continue buying the same volume of goods if prices started to rise as the fall in sterling starts to make imports more expensive?

Patrick Foley, Chief Economist at Lloyds Bank, said that a “a sense of caution continues to frame consumers’ assessment of the outlook, with saving still the most popular choice for any future discretionary income.

“At the time of the survey, the referendum outcome wasn’t known, but if sustained, the recent fall in the currency would put upward pressure on living costs over the next year.”

French president Francois Hollande has dismissed speculation that Britain’s vote to leave the EU could be reversed or ignored, reports the FT’s Anne-Sylvaine Chassany. He is urging the British government to move fast to make Brexit official to allow an orderly transition.

“I can’t imagine the UK government not respecting the choice of the British people…When the people vote, one has to respect the universal suffrage.”

“It’s a historic day because, we have to acknowledge it, a country has decided to leave the EU…It’s painful, in the UK too. But Europe doesn’t stop there.”

Dalia Grybauskaite, the plain-speaking president of Lithuania, said that Britain was “hostage” to the ambitions its politicians, the FT’s Duncan Robinson reports from Brussels.

“I think that mentally and psychologically Brexit is already in place because of the vote and because it was proposed in the first place because of the ambitions of a few politicians, and the country became a hostage of those ambitions.”

mmmm…this could be tricky…..tweeted by an experienced Brussels lobbying hand…

The Guardian has an interview with the Juergen Maier, Siemens UK CEO, in which he says that new wind power investment plans in the UK are now on hold due to the uncertainty caused by Brexit.

Here is the key quote about an existing blueprint to export offshore wind turbine machinery from the Hull hub:

“Those plans were only beginning to happen and I expect that they will stall until we can work out exactly what the [new government’s] plan is, how we can participate in EU research programmes, and until all the issues around tariffs and trade have been sorted out.”

However it is important to note that existing plants are not affected.

Back to politics, where we have a new candidate for the Tory leadership:

Here’s a quick one-sentence summary of Crabb from the FT’s politics team:

Stephen Crabb, the fast-rising work and pensions secretary, is popular and comes from a working class Welsh background: he is inexperienced but seen as a potential bridge to the country’s disenfranchised voters.

The FT’s John Murray Brown interviewed Stephen Crabb in 2014 when he was Welsh secretary.

He claimed then that people in Wales had “lost the memory of what it feels like to be Conservative”. That proved overly downbeat with the party making 3 gains in the 2015 general election, ending with 11 of the region’s 40 MPs, its best result since Margaret Thatcher was in her pomp in the 1980s.

Another fact:

He has already become the first Tory at the cabinet table sporting a beard since 1905 when William Hillier Onslow, the fourth Earl of Onslow, was president of the board of agriculture.

Here’s a quick reminder on the Tory leadership election process. Crucially:

Nominations for the new leader should open on Wednesday evening and close on Thursday lunchtime, a tight timetable giving little time for low-key candidates to gather support among MPs or Conservative grassroots supporters in the country.

And on the otherside of the political divide, a reminder it is not all smooth sailing for Labour either

In Scotland, Nicola Sturgeon and Ruth Davidson have been discussing the prospect of a second Scottish independence referendum. There’s more on Fast FT but the key points:

1) Sturgeon insisted a second referendum on Scottish independence was not her “starting point” in a campaign to ensure the country retains its position within the European Union, although she said “everything must be on the table”.

2) Ruth Davidson raised concerns at the speed with which the SNP-led Government in Edinburgh had asked officials to begin preparing legislation for a second independence referendum north of the Border. She said:

You do not dampen the shockwaves caused by one referendum by lighting the fuse for another nor by saying that the economic impact of leaving one union means you should sever ties with a greater union whose value in trade eclipses the former many times over.

The lessons of last week’s referendum are not a simple them and us.

I think we can all agree that referendums…are bruising.

This in from Henry Foy who is keeping track of developments from Eastern Europe.

Yesterday, leaders launched a stinging attack on the European Commission and its president Jean-Claude Juncker, calling for a change of direction in Brussels as the fallout from Brexit ripples across Europe.

Now, the Visegrad Group of major Central European states has called for a
“smooth secession process” of Britain from the EU, in a statement demanding a “fresh” look at the European project.

“We can never succeed unless we create a genuine Union of trust. Trust needs to be revived on all levels,” said Poland, Hungary, Slovakia and the Czech Republic.

“The genuine concerns of our citizens need to be better reflected. National parliaments have to be heard. The institutions of the European Union need to stick to their missions and mandates,” they said.

“Trust also needs to be fostered among member states starting with overcoming the artificial and unnecessary dividing lines we have seen emerging in the past few months.”

The FT’s Anne-Sylvaine Chassany has another update on the view from Paris:

Since the Brexit vote, France has been adamant the EU needed a quick clarification from the UK government. “It’s not up to the British Conservative party to set the agenda,” French Prime Minister Manuel Valls told French MPs in Paris on Tuesday.

“Ambiguity is not possible, because we need stability, notably the markets,” he said.

Westminster Bridge has been closed on both directions due to an “emergency services incident”, TfL is reporting.

The bond market is caught between Brexit and a central bank response. That is the view of FT’s Dan McCrum and Bob Michele, head of fixed income for JPMorgan Asset Management.

Here they are discuss the state of the bond market in the aftermath of the UK’s Brexit vote, forecasting a further flight quality:

On a day of testy exchanges in Brussels, here are some of the quotes of the day:

Jean-Claude Juncker, president of the European Commission, assures other world leaders the EU will survive:

“The British vote has cut off one of our wings, but we are still flying.”

Luxembourg prime minister Xavier Bettel giving a warning that the UK’s choice in the referendum was a binary one:

“Married or divorced, but not something in between.We are not on Facebook, with ‘It’s complicated’ as a status.”

Mark Rutte, the Dutch prime minister, seeking to explain why Article 50 has not yet been triggered:

“England has collapsed politically, monetarily, constitutionally and economically”

Mr Juncker wagging his finger at UKIP MEPs in the chamber.

“I am really surprised you are here.You were fighting for the exit. The British people voted for the exit. Why are you here?”

Nigel Farage, the UKIP leader, during the same debate:

“When I came here 17 years ago and said I wanted to lead a campaign to get Britain to leave the European Union you all laughed at me. Well I have to say you’re not laughing now are you?”

David Cameron, the UK prime minister, arriving in Brussels ahead of the meeting with EU leaders:

“I’ll be explaining that Britain will be leaving the European Union. But I want that process to be as constructive as possible, and I hope that the outcome can be as constructive as possible. Because of course, while we are leaving the European Union, we mustn’t be turning our backs on Europe.

“These countries are our neighbours, our friends, our allies, our partners. And I very much hope we will seek the closest possible relationship in terms of trade and cooperation and security because that is good for us and that is good for them.”

Meanwhile back in London, Sky’s Faisal Islam offers this on the mood in the UK Parliament:

“It’s a totally febrile atmosphere here. It’s kind of like Game of Thrones meets House of Cards – and if you chuck in the Labour Party – Laurel and Hardy too.”

Larry Summers, the former US Treasury secretary, has been talking on CNBC on Brexit and world affairs.. He is a signed up member of the chorus of gloom on its fallout.

I think for Britain, it is likely to be very serious and it’s got to be an even money chance that Britain goes into, at least, mild recession. That is what the bottom market is telling you. I think for the UK – for the EU rather – it’s got to be a significant loss of confidence.

And confidence, you know, we can’t measure it very well as economists, but it is a very important variable. And I think everybody is going to say right now, “why should I make a major investment? Why should I locate a major investment in an environment this uncertain?” I think they are ramifications everywhere in the global economy.

This has led already, and I think it will probably hold, it may even grow, a flight to quality which pushes the dollar up. It pushes the yen up. And that’s going to create challenges for certain parts of our country. That’s going to create major problems for people who have been traditionally tied to the U.S. dollar. Like the Chinese, like in Hong Kong, you have already seen in the last couple of days significant movements downward in the Chinese currency against the dollar.

And I think this is the most important sort of risk in the system. We are all accustomed to a world where monetary policy can regulate things to at least some degree. Not completely. But when bad things happen, monetary policy eases, and that returns things. And if you look at the history of the U.S. business cycle, you know, every half dozen years the Fed – a little more than half, 7 years – the Fed cuts rates in the neighborhood of 400 basis points to stabilise things. Well, nowhere – not in Japan, not in Europe, not in the United States, not in the UK – is there anything like 400 basis points of room to respond to an insipient downturn.

Watch the video here

The Economist Intelligence Unit have been reading the runes of what is to come for the UK – some interesting forecasts including a baseline prediction that Boris Johnson will succeed David Cameron as PM:

The new prime minister’s priority will be to agree an exit deal with the EU that mitigates the economic risks of leaving.

This process will commence with the triggering of Article 50 of the EU treaties to begin the exit process; we expect this to happen by the end of 2016.

Our baseline forecast is a UK-EU deal that sees the UK, outside the EU, gaining partial limits on migration from the EU at the cost of partial constraints on services trade with the bloc.

The EIU also forecasts a second referendum or an election to ratify such a politically sensitive deal

In our view, a compromise deal like this would require a further public vote—either a general election or a second referendum—to create a mandate for its implementation. We believe that a majority of the electorate would support this kind of compromise, thereby ending the current phase of acute uncertainty about the nature of the UK-EU relationship.

However, this resolution would come at the price of intensified disaffection with mainstream politics among a sizeable minority of voters, who will view compromise on immigration, in particular, as yet another instance of voters being betrayed by the political elite. This will have a lasting impact on political stability, particularly if it leads to a further jump in support for the anti-EU UK Independence Party (UKIP) among former Labour voters.

UKIP remains a relatively small party—it has just one parliamentarian—but it looks set to continue exerting an outsized influence on the centre of gravity in UK politics.

read more here

Jeremy Corbyn is still refusing to step down as leader of the opposition even as he saw an overwhelming vote of no confidence – by about 172 to 40 votes – after a wave of resignations from his front bench, reports the FT’s Jim Pickard.

Mr Corbyn has insisted that he will not give up as Labour leader despite about 50 MPs quitting from senior positions as “front bench” spokespeople over three days.

Instead, the 67-year old is is now braced for a reasonably swift two-month leadership contest, ending in early September, which he expects to win with the support of unions and hardline “Corbynista” supporters.

Rebels are expected to rally behind one single challenger, expected to be either Angela Eagle, former shadow business secretary, or Tom Watson, the current deputy leader.

In the autumn conference Mr Corbyn’s aides intend to push through rules changes making it easier for sitting MPs to be deselected, setting the scene for a remorseless period of in-fighting.

Senior figures in the party now believe it is teetering on the brink of a schism that could be even more damaging than the breakaway of the SDP in the early 1980s.

“It is possible that what we’ll see happen is he wins a leadership election, then have 150 MPs who refuse to stand in an election on a joint ticket with Jeremy Corbyn,” said one person who resigned. “They could split off.”

One persistent worry that has emerged on social media from current – and prospective – EU students is what will happen to their funding arrangements if they are studying in the UK.

Jo Johnson, the university minister, has been on Twitter stressing that “Current students and this autumn’s applicants will continue to receive student finance for duration of their course”.

His full statement is on the government website, but the main thrust is that as of now, things remain as they are for both students and staff.

But for those looking further out:

“Further future funding arrangements with the EU will be determined as part of the UK’s discussions on its membership and we will provide what updates and clarity we can.”

Andrew Bounds, our North of England correspondent, reports that not every investor has been frightened off by Brexit. Steelite International, the Stoke based pottery maker, was bought on Tuesday by US investors.

PNC Riverarch, the private equity arm of the PNC Financial Services Group, and John Miles, a Steelite executive, are the buyers.

Steelite, which employs 1,000 people, is an archetypal British manufacturer. It turned over £102m in the year to 31 December 2015, up from £93.9m a year earlier. Pre-tax profit increased from £6.7m to £8.8m.

The company exports to more than 140 countries. The weak pound only made the deal more attractive. The amount paid was not disclosed.

Steelite chief executive Kevin Oakes is acquiring Royal Crown Derby as part of the deal.

Steelite has prospered by focusing on restaurants and hotels, which need durable products that can be quickly replaced, without waiting for a boat from China. It also makes cutlery and glassware.

Mr Miles said: “Steelite International is known as the leader in the hospitality tableware industry and our goal is to continue that leadership through the introduction of new, creative and innovative products.”

Senior financing for the transaction was provided by the Bank of Montreal and The Private Bank.

After the vote of no-confidence in Corbyn, the Labour Party issued this statement:

“The Parliamentary Labour Party has accepted the following motion – That this PLP has no confidence in Jeremy Corbyn as Leader of the Parliamentary Labour Party.”

To put the magnitude of the no-confidence vote in historical context, our political correspondent Jim Pickard notes:

In 1990 Thatcher resigned after getting 204 votes out of 372 Tory MPs.

In 2016 Corbyn clings on after getting 40 votes from 232 Labour MPs.

So we have a close for the London stock market after UK shares saw bounce today – the first after the market trauma induced by the Brexit vote.

The FT’s Bryce Elder reports:

A broad rally snapped the FTSE 100′s post-Brexit losing streak, with the index rebounding 2.6 per cent at 6,140.39 as nine blue-chip stocks gained for every faller. Over the previous two sessions the FTSE 100 had slipped 5.6 per cent.

The mid-cap FTSE 250 bounced off its lowest level since October 2014, climbing 3.6 per cent. The more UK-centric index had plunged 13.7 per cent since the referendum result.

Top ten risers on the UK market:
● Hargreaves Lansdown +8.9%
● Associated British Foods 8.72%
● Land Securities +8.68%
● Next 8.23%
● Legal & General +7.88%
● ITV +7.79%
● Prudential +7.74%
● Barratt +7.5%
● Lloyds Banking Group +7.43%
● Sage +6.72%
● Capita +6.60%

Brexit and the pound: winners and losers

The pound has fallen more than 12 per cent since the Brexit referendum. While that’s bad news for many, it’s also beneficial for some. The FT’s currencies correspondent Roger Blitz gives a guide to the winners and losers from sterling’s fall.

Seb Payne, one of our commentators reports that Corbyn so far is digging in, with Corbyn putting out a statement citing his “huge mandate”:

“I will not betray them by resigning.Today’s vote by MPs has no constitutional legitimacy”.

Big gains around Europe today for stocks: This is how the leading indices closed:

● Dax +1.93%
● CAC 40 +2.61%
● FTSE MIB +3.30%
● FTSE Eurofirst 300 +2.28%
● Ibex 35 +2.48%

Jeremy Corbyn has issued a statement in reaction to the vote of no confidence he just lost, saying it has “no constitutional legitimacy” and he will not “betray” Labour members by resigning.

The FT’s Jim Pickard reports that rebel MPs were never certain that the coup would claim Mr Corbyn’s scalp.

The veteran MP sees himself as a vector for the left-wing forces which were sidelined under two decades of New Labour dominance: resigning would once again neuter his wing of the party.

After the PLP meeting, Mr Corbyn and his closest ally John McDonnell addressed a hastily-assembled crowd of flag-waving protesters on Parliament Square.

But many colleagues felt unable to continue with the party in such a state of disarray. “It came to a point where we couldn’t pretend to support him any more, it became a point of honesty,” said one Labour aide.

Now New Labour faces its toughest battle since the early 1990s.

Dissident MPs have agreed to rally behind a single candidate – given that the moderate vote was fatally split four ways in last summer’s candidate.

Yvette Cooper, former shadow home secretary, has been considering a second tilt for the post: she gave a speech in central London on Tuesday morning.

The rules are ambiguous on whether a sitting leader automatically gets on to the ballot paper: both sides have conflicting legal advice. But the grassroots would be livid if Mr Corbyn did not get to take part in the race.

Therefore the challenger must then go out to bat against Mr Corbyn in the teeth of sustained – sometimes vicious – hostility from the thousands of members who elected him in the first place.

Labour’s new members still overwhelmingly believe in their leader, according to new research published today by Tim Bale, professor of politics at Queen Mary University of London.

Some 64 per cent of those who joined the party since May 2015 believe Labour is on track to win the next election – or 77 per cent of those who joined since September.

And more than half of them believe that persistent critics of Mr Corbyn should be deselected, according to the survey by YouGov.

Some union officials have been unnerved by the show of strength by the Parliamentary Labour Party and the resignations of many “soft left” MPs. Yet their leaders are still holding the line behind Mr Corbyn, giving him crucial support in his most difficult hour.

The FT’s Lex team has been bottom-fishing – it says there are bargains in the UK stockmarket aplenty after the big sell-of. The column argues that unless recession is inevitable, stocks are suddenly attractive.

Panic, in finance, is the process by which the balance of risk and return moves in the buyers’ favour. The sell-off of British companies went into panic territory on Monday. Though there was a small recovery in the FTSE 250 on Tuesday — a dead kitten bounce, as it were — a wide range of companies are now too cheap, if very worst case scenarios are not realised. For the first time in years the index is cheaper, relative to profits, than the large-cap FTSE 100.

One stock it identifies is homebuilder (and FTSE 100 constituent) Persimmon which has lost more than 35 per cent of its value since the referendum result. It says the stock now trades under eight times trailing earnings, has a 12 per cent free cash flow yield and £500m in net cash on its balance sheet.

Read more on its selections here

If Jeremy Corbyn is ever prised out of the leadership of the UK Labour Party, a racecourse field of contenders awaits, according to the bookies.. here are the contenders:

Meanwhile, the business of government goes on at least somewhere.

Business Secretary Sajid Javid has had some of Britain’s business leaders in for a roundtable in an attempt to reassure companies about the nation’s prospects.

His key message was:

“Britain is open for business. Yes, the financial markets are still reacting to the result. But the fundamental facts remain unchanged.”

And he reiterated that the government is still committed to making the UK a good place to run a business.

“This is not the time for hasty decisions that will be regretted later.”

“Rather, it is the time for government to work with businesses large and small up and down the country so they don’t just deal with the challenges that the result brings, but are also able to embrace the opportunities that it creates.”

“The biggest issue raised was the need to secure continued access to the single market.”

Of course securing membership to the single market will not be straight-forward if Britain also wishes to end the free-movement of workers.

“While I’m not in a position to make promises, I assured everyone that my number one priority will be just that in the negotiations to come.”

John Kay, economist and long-time FT columnist, says in an op-ed just published that the Brexit vote is likely to lead to Scottish indepdendence. He says the Scottish National Party has achieved what the Leave camp in the Brexit vote did not – to be a party of protest and of government at the same time. The timing is now right for the SNP to push its case:

If Scotland had voted for separation in 2014 the path to EU membership would have been slow. While the outcome would have been inevitable, countries with their own separatist movements, notably Spain but also perhaps Belgium and Italy, would probably have been obstructive.

Now, Scottish accession would be greeted with open arms. And while it probably does not make sense for an independent Scotland to join the eurozone, dallying with the prospect is a tease that might assist in negotiations with both the EU and the rest of the UK.

After the Scots independence referendum failed, narrowly, in 2014, I judged that independence was the likely outcome but probably not in my lifetime. It now seems likely that I will see it. Whether it is desirable is another matter altogether. As with Brexit itself, the economic impact of the change is greatly exaggerated by both sides and the costs of transition large.

Read more here

Who will win the Conservative leadership election? Teresa May and Boris Johnson are neck-and-neck according to a poll of Tory members by Conservative Home. Andrea and Leadsom and Liam Fox are next (but some way behind).

While the official pro-EU demonstration in Trafalgar Square, London today was cancelled on safety grounds, it looks like some demonstrators have gone ahead.


Organisers told the Press Association early today that the event had been cancelled because it was not logistically possible ensure the event would go ahead safely, considering the numbers who had expressed and interest in attending.

Sunderland in the north east of England voted strongly to leave the EU (Leave won 61.3 per cent of the vote there). But the city is also home to Nissan, the UK’s biggest single car making site, which last year exported 55 per cent of its 476,589 vehicles to the EU. Now, reports the FT’s Chris Tighe, people on the production line are worried about what Brexit means for their jobs.

Nissan has declined to comment on what Brexit means for the plant, a £3.85bn investment where 6,700 people work. But rumours are sweeping the production line.

Steven, a Nissan production line worker in his 30s who declined to give his surname, said he had woken the morning after voting for Brexit and thought: “What have I done?”

“A lot of people are worried,” he said.

It would hardly be politically popular but one carrot that some lawyers hope could keep big banks from moving staff from the wet, damp island – money.

If the UK was not part of the EU, then maybe it could ditch the bonus cap much hated around Canary Wharf and the City. Here is the case as outlined to IFR:

NEW YORK, June 28 (IFR) – The UK’s exit from the European Union could release its banks from the bloc’s onerous cap on bonuses, potentially making them more competitive in other financial centers like New York, lawyers told IFR.

The bonus cap, implemented in 2014, applies to the single market’s largest banks, limiting bonuses to 100% of salary, or 200% with shareholder approval.

But once the UK formally exits the union it could write its own new rules, said Roger Matthews, a senior director at Dechert in London.

“It may be that the UK government will take the opportunity to ditch the bonus cap,” he told IFR.

UK banks have said the cap puts them at a disadvantage in other countries with looser compensation rules, particularly the US, where banks are not subject to a cap on bonuses.

But before bankers get too excited about this prospect – there is likely to be an important caveat. If banks want the right to sell into the EU, they will have to abide by so-called “passporting” rules. That means the banks would have to choose access vs dosh for their staff. In that case, it is probably the former.

read more of the IFR report here

As the summer holiday season gets under way, what could the UK’s decision to leave the EU mean for consumers? The FT’s Dan Thomas looks at travel, petrol, retail and telecoms.

There has been lots of speculation in the days since the Brexit vote about a surge in Irish passport applications.

And earlier today there was the suggestion on social media that Irish diplomats were expecting 1m applications.

While there has clearly been an upsurge in interest, official sources have poured cold water on that staggering figure.

The Irish foreign ministry told the FT’s Vincent Boland that this figure is:

“Purely speculative to say the least and not based on any factual information.”

Just over 670,000 Irish passports were issued in 2015 – the vast majority of which were to Irish citizens renewing their old ones.

Martin Wolf’s latest column has just been published; it’s not a terribly uplifting read. He says it “would be astonishing if there were to be no recession” and predicts buyers’ remorse will soon set in. (We’re seeing some signs of that in Sunderland’s Nissan plant, as we noted in an earlier post).

But there are options. The best? To do nothing.

The UK must work out what it wants. The EU must consider whether free movement is inviolable. The UK should avoid triggering Article 50: that would eliminate its leverage and would push it out of the EU within two years, probably with no further trade agreement. Any such stalemate cannot continue forever. But there could be benefits, for both sides, in avoiding too hasty and brutal an ending.

The CBI, the UK’s biggest business lobby group, has met with business secretary Sajid Javid today to tell him the “three urgent priorities” for corporate Britain.

Here they are, via the CBI’s director general Carolyn Fairbairn:

“The Government must communicate and demonstrate that the UK is open for business and investment, including by keeping critical infrastructure projects and spending decisions on track.

“We must give urgent long-term reassurance to the thousands of EU migrants already working in the UK that they can stay here.

“A visible commitment to openness must be at the heart of our new relationship with the EU. In practice this means tariff and barrier free access to the single market; maintaining trade deals around the world; attracting and keeping skills; and working out the trade-offs between these three.”

The resignations just keep coming for Labour leader Jeremy Corbyn.

Last year, with some fanfare, the new Labour leadership unveiled an “Economic Advisory Committee”.

One of its members, the former Bank of England rate setter Danny Blanchflower has just announced on Twitter that he has resigned.

We’re wrapping up the Brexit live blog for today, thanks for joining us. We’ll back back again tomorrow morning. Here’s a final reading recommendation for the day: the FT’s leader (which will be in tomorrow’s paper) calling for Britain’s political class to pull itself together.

A snippet:

The country’s institutional strength has historically been a huge asset that must not be squandered. It has been eroded in the course of a campaign where one of the strongest challengers to replace David Cameron as prime minister has questioned the probity of Mark Carney, the central bank governor; and Conservative MPs who usually embody the establishment have repeatedly sought to undermine the credibility of government departments and technocratic institutions.

These tactics do profound damage to the UK’s reputation and to the functioning of its institutions. International observers now see politicians abdicating responsibility, intent instead on internal party machinations.

The S&P downgrade underlines the urgency of articulating a coherent policy that can sustain the confidence of both international investors and UK consumers. The shock of the referendum has not yet become a crisis. But businesses and households are likely to delay decisions, and the economy is bound to suffer, so long as Britain remains without a prime minister, a functioning opposition or clarity from the Leave campaign about the way forward.