George Osborne had one job to do on Monday morning: calm panicking financial markets after Britain’s momentous vote to leave the EU last week.
With the pound falling sharply again overnight, it was a tall order, especially for the man who just days ago was spearheading “project fear”.
Before the referendum, Osborne had warned Brexit could spark recession, send the pound tumbling, knock house prices, depress wages, stoke inflation and lead to more than half a million job losses.
Now that it’s clear those dire warnings were a flawed strategy to secure a remain vote, Osborne called reporters to the Treasury for a statement before the stock market opened, which his office assured us would “provide reassurance about financial and economic stability in light of the referendum result”.
So how did he do?
Well, a tired-looking but calm Osborne certainly tried his best. He had a list of messages of convey to investors and the public and those messages were pretty much what people wanted to hear.
Firstly, there will be relief on financial markets that the chancellor did not follow David Cameron in resigning. The chancellor had gone off radar, aside from a few tweets, since Friday’s result. After he called his pre-market press conference there had been speculation it could be to bid farewell.
As he spoke and emphasised he would “play an active part” in negotiating Britain’s future relationship with the EU, the pound trimmed some of its earlier losses.
Secondly, it will be helpful that Osborne addressed head on the market volatility, which saw global stocks shed a record $2tn on Friday. As expected, he sought to assure investors that the Treasury, the Bank of England and the Financial Conduct Authority had spent the last few months “putting in place robust contingency plans”.
For good measure, the chancellor rebuffed any suggestion this could be a re-run of the Lehman crisis: “We are determined that unlike eight years ago, Britain’s financial system will help our country deal with any shocks and dampen them – not contribute to those shocks or make them worse.”
Thirdly, Osborne sought to appeal to business leaders who had come out in force in recent days to warn against any kneejerk decisions. The chancellor said that the UK should take its time invoking article 50 of the Lisbon treaty – the process that starts Britain’s exit from the EU.
Finally, Osborne tried to rein in the rhetoric on Brexit’s economic impact.
The worry, of course, is that after warnings of recession before the referendum, fearful businesses and consumers will now delay spending: people pull out of house purchases, manufacturers delay buying new machinery, companies hold off from hiring, families defer booking holidays and so on. This then becomes a dangerous spiral, their fears of a downturn are the very thing that deepens that downturn.
So unsurprisingly, the man who gave us warnings of recessions and predicted that households could lose thousands of pounds before the referendum, tried to change the tone. Osborne steered clear of the R-word and instead said Britain would face “adjustment”.
In a classic British understatement, the chancellor opined: “It will not be plain sailing in the days ahead.”
He also rowed back on the emergency budget he had threatened in the event of a leave vote. Now Osborne is saying the Treasury response to Brexit will not come until the autumn when the fiscal watchdog, the Office for Budget Responsibility, has had a chance to assess the economy and a new prime minister is in place.
In short, Osborne ticked a lot of boxes. So far the pound has steadied and the FTSE 100 is not down as sharply as it might have been. But the UK is facing a political crisis and an unprecedented process of untangling from the EU. The chancellor’s soothing words are unlikely to provide anything but a short-term tonic to nervous households, businesses and investors.
