George Soros warns of Brexit threat to pound

THE ASSOCIATED PRESS
Business magnate George Soros arrives to speak at the Open Russia Club in London. (Reuters)

LONDON: Billionaire currency trader George Soros has warned that a vote for Britain to leave European Union will trigger a plunge in the pound — without benefits that can come with a devalued currency.
In an op-ed piece in Tuesday’s Guardian, Soros says a decision to leave the 28-nation bloc in Thursday’s vote will cause sterling to drop quickly. Soros predicted the drop will be more dramatic than when Britain crashed out of the European Exchange Rate Mechanism in September 1992.
Soros substantially profited — at the expense of the Bank of England and the British government — when the pound lost 15 percent of its value.
He said it is reasonable to assume that after a Brexit vote the pound would fall by at least the same level of 15 percent or possibly more than 20 percent from its present level of $1.46 to below $1.15. The pre-referendum trading range was $1.50 to $1.60
“If sterling fell to this level, then ironically one pound would be worth about one euro — a method of “joining the euro” that nobody in Britain would want,” he wrote.
Soros says those who believe a “leave” vote will have no impact on their personal finances are guilty of “wishful thinking.”
He said that a large devaluation would hurt the economy for several reasons, the first of which being that the Bank of England would not cut interest rates — which are already at a record low.
Further, Britain’s current account deficit is much larger relatively than it was in 1992, meaning that Britain is dependent on foreign capital. With uncertainty dogging the terms of a divorce, Soros argued capital will move in the other direction.
“A post-Brexit devaluation is unlikely to produce the improvement in manufacturing exports seen after 1992, because trading conditions would be too uncertain for British businesses to undertake new investments, hire more workers or otherwise add to export capacity,” he said.
Soccer star David Beckham also threw his support behind those campaigning to keep Britain in the European Union, describing Europe as a team that needs to play together to succeed.
“We live in a vibrant and connected world where together as a people we are strong,” the former England captain said in a statement released Tuesday. “For our children and their children, we should be facing the problems of the world together and not alone.”