George Osborne, U.K.’s chancellor of the exchequer, reacts during a news conference on Monday, June 27, 2016

Source: Bloomberg

Prime Minister David Cameron rejected calls for a do-over vote on leaving the European Union and set up a team of officials to prepare for withdrawal following the referendum last week that stunned the world and triggered financial-market turmoil.

The pound extended its drop to touch the lowest against the dollar since 1985 and international policy makers scrambled to respond after a weekend in which Cameron’s administration appeared rudderless and Scotland’s government floated a referendum on its own independence.

Members of the splintered government sought to reassure investors they’ll be able to navigate the fallout. Chancellor of the Exchequer George Osborne broke his silence to declare “you should not underestimate our resolve” to limit an “inevitable adjustment” in the economy. Boris Johnson, the pro-Brexit favorite to succeed Cameron, said “the negative consequences are being wildly overdone, and the upside is being ignored.”

The rhetoric brought policy makers no closer to clarifying just what the U.K’s new relationship with the EU will look like and how badly the economy will suffer from the rupture. With Britain facing its greatest crisis in at least half a century, German Chancellor Angela Merkel and fellow European leaders today kick off a series of crisis talks.

A new Cabinet Office unit, comprising officials from the Treasury and Foreign Office will start doing the groundwork for leaving the EU, which Britain joined in 1973. Helen Bower, Cameron’s spokeswoman, told reporters in London after the cabinet meeting that a second referendum was “not remotely on the cards” following a public petition for one.

The BBC reported that the House of Commons is investigating allegations of fraud in connection with the petition, which had more than 2.5 million signatures.

What Next?

Europe’s leaders must decide how to treat Britain in the divorce talks and what steps to take to reinforce confidence in a bloc set to shrink with the departure of its second-biggest economy. Failure to deliver a strategy could prompt markets to force their hand — as they did after the collapse of Lehman Brothers Holdings Inc. and Greece’s debacle. Merkel said today there would be no informal talks with the U.K. before it filed to exit.

U.S. Secretary of State John Kerry arrived in Brussels today and was due to head to Londonto assess the situation first hand. “There are ways to smartly move ahead in order to protect the values and interests that we share in common,” Kerry said in Rome on Sunday.

“At this point in time, policy makers, both in the U.K. and in Europe, are holding that level of uncertainty in their hands,” International Monetary Fund Managing Director Christine Lagarde said on Sunday. “How they come out in the next few days is going to really drive the direction in which risk will go.”

One sign voters elsewhere may already be favoring the safety of the status quo: Spain’s election on Sunday consolidated Prime Minister Mariano Rajoy’s position over insurgent populist parties.

Healing Process

Cameron will address parliament later as the race to replace him nears, with Johnson and Home Secretary Theresa May among likely contenders. The Conservative Party today accelerated the timetable to elect a new leader, bringing the date forward by almost a month to Sept. 2.

Johnson used his column in the Daily Telegraph to appeal to “Remain” voters, acknowledging “we must reach out, we must heal, we must build bridges – because it is clear that some have feelings of dismay, and of loss, and confusion.”

He also gave his backing to Bank of England Governor Mark Carney, who was criticized by the Brexit camp during the campaign for outlining the economic consequences of leaving.

Osborne, who had warned that a Brexit would trigger a “DIY recession” and require an emergency squeeze of fiscal policy, downplayed those warnings on Monday. Instead, he pledged to “do everything I can” to make the new order work and revealed other contingency plans are available to soothe the transition if needed. He said he will reveal his own career plans in coming days.

Sterling’s Slump

The pound slumped 3.6 percent to $1.3184 at 1:50 p.m., bringing its decline to more than 11 percent since the referendum. The FTSE 100 fell 2 percent and 10-year gilt yields fell below 1 percent for the first time on record. An index of U.K. banks fell 7 percent, extending Friday’s 10 percent drop.

In the days before the vote, billionaire George Soros had warned that the pound could slump more than 20 percent against the dollar because the true cost of Brexit was being underestimated. Still, Soros, whose 1992 bet against the pound made investing history, didn’t repeat the gamble while he was arguing for Britain to remain in the EU.

Economists are already downgrading their economic outlook. Goldman Sachs Group Inc. predicted a recession by early next year and interest rate cuts from the Bank of England. EasyJet Plc and Foxtons Group Plc warned they may take a hit, and almost two-thirds of members of the Institute of Directors said the Brexit vote is negative for their business. EasyJet shares were down 18 percent, while Foxtons tumbled 22 percent.

The sense of chaos in British politics was deepened by the revolt in the opposition Labour Party. Leader Jeremy Corbyn vowed to stay on despite a string of resignations from his shadow cabinet and a refusal by his own deputy, Tom Watson, to publicly back him. Labour spokespeople on business, energy and pensions all resigned on Monday along with at least 17 other members of the team, adding to 12 departures on Sunday.