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UK starts to count the cost of Brexit vote

Traders from BGC, a global brokerage company in London's Canary Wharf react as European stock markets open early after Britain voted to leave the European Union.
Russell Boyce | Reuters
Traders from BGC, a global brokerage company in London's Canary Wharf react as European stock markets open early after Britain voted to leave the European Union.

Just 24 hours after deciding to quit the European Union, the U.K. is already starting to absorb the financial ramifications of its shock decision.

Late Friday night, after the U.K. suffered a bruising day on the world's market's, U.S. ratings agency Moody's announced that it had lowered its outlook on the country's credit rating from stable to negative. If a negative outlook turns into a ratings cut, it could put upward pressure on the country's long-term borrowing costs.

In a statement, Moody's warned that the U.K. vote to leave the EU "will herald a prolonged period of uncertainty for the UK, with negative implications for the country's medium-term growth outlook."

The agency also warned that the expected protracted renegotiation of the U.K.'s trade and economic relations with Europe and the rest of the world would lead to " heightened uncertainty, diminished confidence and lower spending and investment to result in weaker growth."

"Over the longer term, should the UK not be able to secure a favorable alternative trade arrangement with the EU and other countries, the UK's growth prospects would be materially weaker than currently expected."

The result of Thursday's referendum, which took many polling companies and markets by surprise, meant for a torrid day on the world's financial markets, wiping some $2.1 trillion off stocks globally.

The leave camp secured 51.9 percent of the vote in the U.K. with 17.4 million votes, throwing markets around the world into turmoil and prompting sterling to hit its lowest level against the dollar since 1985.

David Cameron announced his resignation as Prime Minister of the United Kingdom Friday after the shock victory for the campaign to leave the EU, clearing the path for a pro-Brexit party leader to negotiate the U.K.'s exit.

In the U.K., while the FTSE100's global companies ended the day 3.2 percent lower and 2 percent up on the week, the index of smaller British firms, the FTSE 250, closed 7.2 percent lower on the day.

The market turmoil reflected concerns over the U.K's place in the global financial community, and its future access to European markets.

Head of the Eurogroup of euro zone finance ministers, Jeroen Dijsselbloem, warned late Friday that the City of London's financial institutions' access to the Europe's internal market will be hit by the decision to quit the EU.

Speaking on RTL television, Dijsselbloem said that reduced access was the "price" of leaving the 28-country bloc and Amsterdam and Frankfurt could benefit.

"A few years ago, London took out adverts in the Asian edition of the Financial Times saying it was the place to come if you wanted to do business in the EU," he said, Reuters reported. "Now they can't place that advert, and the Asians will go to Amsterdam or Frankfurt instead."

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