The FTSE 100 lost more than 500 points or 8.5% when markets opened this morning after the UK voted to leave the European Union after 43 years.
House builders and banks were hit particularly hard. Barclays saw its share price plummet by 35%.
In a statement, the Bank of England said: "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."
Governor of the Bank of England, Mark Carney, said the Bank "will not hesitate" to introduce additional monetary policy to protect the British economy and financial markets, if required.
The value of the pound fell to its lowest level since 1985 following the result, having hit its highest point of 2016 when the polls closed at 10pm on Thursday.
The result of the referendum has cost the Prime Minister his job, with David Cameron saying he was not the right person to lead the UK in its negotiations to withdrawal from the EU. Mr Cameron will continue as Prime Minister for the coming months, with a new Prime Minister in place before the Conservative party conference in October.
Dennis de Jong, managing director of UFX.com, said: "This is simply unprecedented, the pound has fallen off a cliff and the FTSE is now following suit.
"Britain's EU referendum has been a cloud hanging over the global economy for the past few months and that cloud has got very dark this morning.
"The markets despise uncertainty, yet that is exactly what they're faced with this morning. The shockwaves are likely to reverberate for some time and the warning lights are flashing brighter now than ever."
It is the single largest one-day drop since the financial crisis was triggered by the collapse of Lehman Brothers in 2008.
Markets around the world have suffered following the result of the referendum. Japan's Nikkei 225 dropped by 8%, with the Bank of Japan saying it "would supply money to the markets if necessary".
Frankfurt's Dax index fell 8.33% upon opening, with the Paris Cac 40 market plunging 10%.
Brent crude oil prices fell 5.2%, while commodity prices jumped 7%.
