This article was last updated on June 24, 8:45 AM EDT.
By Guy Faulconbridge and Kate Holton
LONDON (Reuters) – Britain voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow to the European project of greater unity since World War Two.
Global financial markets plunged on Friday as results from a referendum showed a 52-48 percent victory for the campaign to leave a bloc Britain joined more than 40 years ago.
The pound fell as much as 10 percent against the dollar to touch levels last seen in 1985, on fears the decision could hit investment in the world’s fifth-largest economy, threaten London’s role as a global financial capital and usher in months of political uncertainty.
World stocks headed for one of the biggest slumps on record, and billions of dollars were wiped off the value of European companies. Britain’s big banks took a $130 billion battering, with Lloyds <LLOY.L> and Barclays <BARC.L> falling as much as 30 percent at the opening of trade.
The United Kingdom itself could now break apart, with the leader of Scotland – where nearly two-thirds of voters wanted to stay in the EU – saying a new referendum on independence from the rest of Britain was “highly likely”.
An emotional Cameron, who led the “Remain” campaign to defeat, losing the gamble he took when he called the referendum three years ago, said he would leave office by October.
“The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction,” he said in a televised address outside his residence.
“I do not think it would be right for me to be the captain that steers our country to its next destination,” he added, choking back tears before walking back through 10 Downing Street’s black door with his arm around his wife Samantha.
Quitting the EU could cost Britain access to the EU’s trade barrier-free single market and means it must seek new trade accords with countries around the world.
The EU for its part will be economically and politically damaged, facing the departure of a member with its biggest financial center, a U.N. Security Council veto, a powerful army and nuclear weapons. In one go, the bloc will lose around a sixth of its economic output.
“It’s an explosive shock. At stake is the break up pure and simple of the union,” French Prime Minister Manuel Valls said. “Now is the time to invent another Europe.”
The result emboldened eurosceptics in other member states, with French National Front leader Marine Le Pen and Dutch far-right leader Geert Wilders demanding their countries also hold referendums. Le Pen changed her Twitter profile picture to a Union Jack and declared “Victory for freedom!”
The vote will initiate at least two years of divorce proceedings with the EU, the first exit by any member state. Cameron – who has been premier for six years and called the referendum in a bid to head off pressure from domestic eurosceptics – said it would be up to his successor to formally start the exit process.
His Conservative Party rival Boris Johnson, the former London mayor who became the most recognizable face of the “Leave” camp, is now widely tipped to seek his job.
Johnson left his home to jeers from a crowd in the mainly pro-EU capital. He spoke to reporters at Leave campaign headquarters, taking no questions on his personal ambitions.
“We can find our voice in the world again, a voice that is commensurate with the fifth-biggest economy on Earth,” he said.
There was euphoria among Britain’s eurosceptic forces, claiming a victory over the political establishment, big business and foreign leaders including U.S. President Barack Obama who had urged Britain to stay in.
“Let June 23 go down in our history as our independence day,” said Nigel Farage, leader of the eurosceptic UK Independence Party, describing the EU as “doomed” and “dying”.
On the continent, politicians reacted with dismay.
“It looks like a sad day for Europe and Britain,” said German foreign minister Frank-Walter Steinmeier. His boss Angela Merkel invited the French and Italian leaders to Berlin to discuss future steps.
The shock hits a European bloc already reeling from a euro zone debt crisis, unprecedented mass migration and confrontation with Russia over Ukraine. Anti-immigrant and anti-EU political parties have been surging across the continent, loosening the grip of the center-left and center-right establishment that has governed Europe for generations.
U.S. presidential candidate Donald Trump, whose own rise has been fueled by similar disenchantment with the political establishment, called the vote a “great thing”. Britons “took back control of their country”, he said in Scotland where he was opening a golf resort. He criticized Obama for telling Britons how to vote, and drew a comparison with his own campaign.
“I see a big parallel,” he said. “People want to take their country back.”
American Vice President Joe Biden said the United States would have preferred Britain to remain in the EU, but respected the decision.
Britain has always been ambivalent about its relations with the rest of post-war Europe. A firm supporter of free trade, tearing down internal economic barriers and expanding the EU to take in ex-communist eastern states, it opted out of joining the euro single currency or the Schengen border-free zone.
Cameron’s ruling Conservatives in particular have harbored a vocal anti-EU wing for generations, and it was partly to silence such figures that he called the referendum in 2013.
When he called the referendum, he thought it would be a sure thing. But the 11th hour decision of Johnson – a schoolmate from the same elite private boarding school – to come down on the side of Leave gave the exit campaign a credible voice.
Even until the last minute, bookmakers and financial markets had overwhelmingly predicted a Remain vote.
World leaders including Obama, Chinese President Xi Jinping, German Chancellor Angela Merkel, NATO and Commonwealth governments had all urged a “Remain” vote, saying Britain would be stronger and more influential in the EU than outside.
The four-month campaign was among the divisive ever waged in Britain, with accusations of lying and scare-mongering on both sides and rows over immigration which critics said at times unleashed overt racism.
It revealed deep splits in British society, with the pro-Brexit side drawing support from millions of voters who felt left behind by globalization and blamed EU immigration for low wages and stretched public services.
At the darkest hour, a pro-EU member of parliament was stabbed and shot to death in the street. The suspect later told a court his name was “Death to traitors, freedom for Britain”.
Older voters backed Brexit; the young mainly wanted to stay in. London and Scotland supported the EU, but wide swathes of middle England, which have not shared in the capital’s prosperity, voted to leave.
THREAT OF UK BREAK-UP
The United Kingdom itself now faces a threat to its survival. Scottish First Minister Nicola Sturgeon said it was “democratically unacceptable” for Scotland to be dragged out of the EU against its will.
“It is a statement of the obvious that the option of a second referendum must be on the table and it is on the table,” she told reporters, two years after Scots voted to stay in the United Kingdom. “I think an independence referendum is now highly likely.”
The global financial turmoil was the worst shock since the 2008 economic crisis, and comes at a time when interest rates around the world are already at or near zero, leaving policymakers without the usual tools to respond.
The body blow to global confidence could prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all major central banks, despite their limited options.
The Bank of England pledged a huge financial backstop to calm plunging markets. Governor Mark Carney said it was offering to provide more than 250 billion pounds ($347 billion) plus “substantial” foreign currency liquidity and it was ready to take additional measures if needed.
Other central banks around the globe also intervened in markets. The European Central Bank said it was ready to provide euro and foreign currency liquidity if necessary.
Left unclear is the relationship Britain can negotiate with the EU once it leaves.
To retain access to the single market, vital for its giant financial services sector, London may have to adopt all EU regulation without having a say in its shaping, contribute to Brussels coffers, and continue to allow free movement as Norway and Switzerland do – all things the Leave campaign vowed to end.
EU officials have said UK-based banks and financial firms would lose automatic access to sell services across Europe if Britain ceased to apply the EU principles of free movement of goods, capital, services and people.
Huge questions also face the millions of British expatriates who live freely elsewhere in the bloc and enjoy equal access to health and other benefits, as well as millions of EU citizens who live and work in Britain.
(Additional reporting by William James, Kylie MacLellan, Sarah Young, Alistair Smout, Costas Pitas, Andy Bruce and David Milliken; Writing by Mark John and Pravin Char; Editing by Peter Graff)
Copyright 2016 The National Memo