David Cameron and George Osborne have moved to calm nerves over Britain's withdrawal from the EU, as the financial markets responded with continued volatility after Thursday's Brexit vote.
Both Prime Minister and Chancellor acknowledged the coming months would not be "plain sailing" and made clear they expected "adjustments" to the expected path of the economy, but insisted the UK was strong enough to weather the storm.
Their efforts were not enough to prevent turmoil on the markets, with the pound dropping to a 31-year low against the US dollar while more than £40 billion was wiped off the value of Britain's biggest companies as the FTSE 100 Index fell 2.6%.
The UK suffered a further blow as US ratings agency Standard & Poor's stripped Britain of its top credit grade following a similar move by Moody's on Saturday.
S&P downgraded the country's sovereign rating by two notches, from AAA to AA, warning the Brexit vote would lead to "a less predictable, stable and effective policy framework in the UK".
READ MORE: Ratings agency Standard & Poor's strips UK of top credit grade after Brexit vote
In a statement to the House of Commons following the first post-referendum meeting of Cabinet, Mr Cameron resisted European pressure for a quick resolution to the situation, insisting it would be for his successor to trigger the two-year process of negotiating a new relationship by invoking Article 50 of the Lisbon Treaty. He dismissed calls for a second referendum to attempt to reverse last week's vote.
His position means talks will be put on hold for more than two months, as a Conservative backbench committee set an accelerated deadline of September 2 for the election of a new party leader.
Meeting in Berlin, the leaders of Germany, France and Italy slapped down calls from Brexit standard-bearer Boris Johnson for informal discussions on future relations before the official notification of intention to leave through Article 50. "There are no informal talks about the exit of Great Britain before an application for exiting the EU has been submitted to the European Council," said German Chancellor Angela Merkel.
On a hastily arranged visit to Brussels and London, US secretary of state John Kerry warned European leaders not to "cut off your nose to spite your face", saying: "Yes, the UK and EU relationship will now change, but what will never change is that we are strongest when we stay united as a transatlantic community ... rooted and grounded in the values of freedom, open markets and tolerance."
Mr Kerry assured Foreign Secretary Philip Hammond that the US/UK special relationship remained "as strong and as crucial as ever" following the referendum.
READ MORE: No 10 insists 'last thing' Scotland needs right now is another divisive independence poll
Mr Osborne ruled out an emergency budget until the new prime minister is in place, despite warning during the referendum campaign that the hit to state revenues expected after a Brexit vote would require action to hike taxes or cut spending within a couple of months.
Mr Johnson - who is widely tipped as Mr Cameron's most likely successor but was not in the Commons to hear the PM's statement - welcomed the Chancellor's reassurance that the UK economy was "about as strong as it could be" to confront the challenge of separating from the EU and that Britain remained "open for business".
"It is clear now that Project Fear is over, there is not going to be an emergency budget, people's pensions are safe, the pound is stable, the markets are stable, I think that's all very good," Mr Johnson told reporters as he left his London home.
READ MORE: Nicola Sturgeon not seeking 'green light' for another independence referendum in emergency debate
Mr Cameron stressed that it was important for Britain to maintain the "strongest possible" economic links with the EU as well as its extensive security co-operation.
"Britain is leaving the European Union, but we must not turn our back on Europe or the rest of the world," he said.
"I believe we should hold fast to a vision of Britain that wants to be respected abroad, tolerant at home, engaged in the world and working with our international partners to advance the prosperity and security of our nation for generations to come."
READ MORE: Downing Street: Second EU referendum 'not remotely on the cards'
He strongly condemned abuse of members of ethnic minority communities reported after last week's vote as well as "despicable" graffiti daubed on a Polish community centre.
In an early-morning appearance at the Treasury moments before the markets opened, Mr Osborne said that, after talks with Bank of England governor Mark Carney over the weekend, "further well-thought through contingency plans" were in place to inject stability if needed.
"It will not be plain sailing in the days ahead. But let me be clear - you should not underestimate our resolve," the Chancellor said.
"We were prepared for the unexpected and we are equipped for whatever happens."
Mr Osborne insisted he was not backing away from warnings that there could be a £36 billion black hole in the public finances by 2030, which sparked accusations of scaremongering from Brexit campaigners during the referendum. It was already clear that companies were "pausing" investment and recruiting decisions, while volatility in the markets was "likely to continue", he said.
Mr Cameron announced the establishment of a new Whitehall unit to prepare advice for his successor on options in the Brexit negotiations. Cabinet minister Oliver Letwin was also asked to gather views from inside and outside government on the way forward.
Unravelling the UK's relations with the EU after 43 years will be "the most complex and most important task that the British Civil Service has undertaken in decades", said the PM.
ends
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