Soros says Brexit would make some speculators rich, voters poor

LONDON, June 21 — Billionaire investor George Soros said the pound may slump more than 20 per cent against the dollar if British voters decided to leave the European Union, a devaluation bigger and more disruptive than when he profited by betting against the currency in 1992.

“Brexit would make some people very rich — but most voters considerably poorer,” Soros wrote in an op-ed published in the UK’s Guardian newspaper today.

The pound would fall by at least 15 per cent if the nation votes to leave the trading block and potentially more than 20 per cent to below US$1.15, the investor wrote. He said voters are grossly underestimating the true costs of Brexit, which will have an “immediate and dramatic impact” on financial markets, investments and jobs.

Governments and investors around the world are watching the referendum amid concern that a decision to leave would spark turmoil across global markets. The pound surged the most since 2008 yesterday, spurring a global rally in higher-yielding currencies, as polls signalled the campaign for the UK to stay in the EU was gaining momentum.

A more than 20 per cent slump would result in the pound at a level that would ironically mean the currency would be worth about one euro, a method of “joining the euro” that nobody in Britain would want, Soros said.

Soros said a large devaluation of the pound would be less benign than in 1992 because the Bank of England won’t be able to cut interest rates if voters decide to leave the EU since rates are already at low levels. The central bank will also have little room to move in the strong likelihood of a recession after Brexit caused by a decline in house prices and a loss of jobs.

Soros cited Britain’s large current account deficit, larger than 1992 and 2008, saying the nation is more dependent than ever on foreign capital. After a Brexit, capital flows would reverse, especially during the two years of uncertainty when Britain negotiates its exit from the EU, he wrote.

Soros said a post-Brexit devaluation is unlikely to result in an improvement in manufacturing exports that was seen after 1992 because trading conditions will be too uncertain for British businesses to make new investments, hire more workers or add to export capacity. — Bloomberg

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