The financial consequences of a Brexit would be no joke, George Soros announced. In an open-ed in The Guardian published on Monday morning, the financier warns that “British voters are now grossly underestimating the true costs of leaving.”
For some households, the cost will be high and come in the form of fluctuations in prices and a weak job market due to the depreciation of the pound. Mr. Soros cites studies by the Bank of England, the Institute for Fiscal Studies and the IMF which estimate yearly income loss for British households ranging between £3,000 and £5,000 if Britain votes ‘yes’ on the referendum taking place this coming Thursday, June 23rd.
Needless to say, the Brexit effect will also give markets and investment the jitters. Here is George Soros’ take on it:
Although Brexit supporters claim it will be inevitably a healthy one, Soros claims the opposite. If a ‘yes’ vote is reached, he predicts the pound will fall “by at least 15% and possibly more than 20%, from its present level of $1.46 to below $1.15” — ironically, setting it at par with the euro that it is trying so hard to run away from.
Capital Flows Will Turn Outwards
The UK is thoroughly dependant on inflows of foreign capital, says Soros. If the referendum passes, the “divorce” negotiations with its largest trading partner would take a couple of years — time enough for the changing tides to turn capital inflows into capital outflows.
If a ‘yes’ vote passes the UK-EU separation will not take place overnight. The negotiations are estimated to take up to two years; time during which uncertainty will reign. “Trading conditions would be too uncertain for British businesses to undertake new investments, hire more workers or otherwise add to export capacity,” Soros warns.
Soros by no means paints a pretty picture for a post-Brexit apocalypse Britain. “A vote for Brexit would make some people very rich – but most voters considerably poorer,” he sentences. Meanwhile, he’s armed himself with assets that will not only protect him but benefit him in the case of a Brexit – 1 billion dollars worth invested in gold and PUTs. But will the British people heed the financier’s advice?
Read the full article on The Guardian.