The pound tumbled on the world markets today after Britain voted to leave the EU.
The Bank of England has said it will take “all necessary steps” to ensure monetary and financial stability in the wake of the Brexit vote.
In a statement issued following Britain’s referendum on the European Union, the Bank said: “The Bank of England is monitoring developments closely.
“It has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks. The Bank of England will take all necessary steps to meet its responsibilities for monetary and financial stability.”
The comments come after economists began to downgrade their forecasts for UK growth, with a recession forecast unless a quick deal with the EU can be done.
Economists predict that governor of the Bank Mark Carney could move to cut interest rates or expand the Bank’s quantitative easing programme.
Britain is also set to lose its last remaining triple-A credit rating, with S&P saying that maintaining it is “untenable”.
The pound has crashed to its lowest level in over 30 years, plunging 10% against the dollar overnight to 1.33 US dollars, a low not seen since 1985 as the Leave campaign headed for victory.
Sterling was down against every major currency group, including the euro and the Japanese Yen.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “UK voters have opted for Brexit. If fully followed through, this will be an act of economic self-harm with global ramifications. The scintilla of hope is that a revised deal can be negotiated with a panicked EU.
“Unless a swift deal can be done, however, the UK is likely to enter recession. Businesses will hold back from investing, credit costs will rise, and import prices will soar, squeezing households’ spending power.”
Many UK holidaymakers travelling abroad will pay more for foreign currency as the pound plunged to its lowest level since 1985 following the EU referendum.
Sterling was down against every single major currency group.
The pound crashed 10% against the dollar overnight to 1.33 US dollars, a low not seen in 30 years.
This could make the UK a more affordable destination for overseas tourists.
The victory for the Leave campaign is unlikely to have any immediate ramifications for UK tourists passing through immigration controls abroad, or for inbound tourism.
A spokesman for Heathrow Airport said: “Anyone travelling through the airport will find it operating normally with no changes to security and immigration.”
Bill Gibbons, director of industry body Discover Ferries, which represents 12 ferry companies, insisted that the vote will not have an impact on summer travel plans.
“Ferries will continue to travel as normal and there will be no changes to routes or schedules,” he added. “It will be business as usual.”
Joel Brandon-Bravo, UK managing director of travel deals company Travelzoo, warned that the referendum result would have an impact on the tourism industry in several ways.
He said: “The next 24 months of negotiations will be crucial for British travel - particularly if the UK Government wants to maintain inbound tourism from the EU, and avoid a price hike for Britons wanting to travel abroad for holidays.
“Obviously top priority is dealing with the impact the referendum result will have on the value of the pound, but there are other factors that could make the result a big blow for the travel industry.”
Mr Brandon-Bravo urged the Government to quickly negotiate how an independent UK will operate in the European Common Aviation Area.
Travel organisation Abta warned during the referendum campaign that foreign travel was “likely to become more expensive” following Brexit.
It published a report which stated that holidaymakers and business travellers may face increased costs if an exit vote leads to a fall in the value of sterling, while travel businesses may also raise prices in order to recoup the cost of new taxes and levies being introduced.
Another potential factor which could make travel more expensive is consumers needing to cover additional insurance costs if the UK leaves the European Health Insurance Card scheme, according to the report produced with economic analysis by Deloitte.
The research concluded: “In the longer term, following a Brexit, travel is likely to become more expensive.”
Andrew Swaffield, chief executive of low-cost airline Monarch, responded to the study by saying that the UK leaving the EU could lead to an increase in air fares and a reduction in the number of flights.