LONDON — Billionaire investor George Soros has warned that Brexit is a “lose-lose proposition” which will trap the UK into a spiral of growing household debt, collapsed consumer spending, and falling living standards.
Soros, a Hungarian-American business magnate worth over £20 billion ($US25 billion), is known as “The Man Who Broke The Bank Of England” for his role in crashing the pound during the 1992 Black Wednesday crisis after he short sold $US10 billion of the currency.
He wrote in an op-ed published on Monday that “economic reality” is beginning to catch up with UK voters, with figures published by the Office for National Statistics last week showing that wage growth is now failing to keep pace with rampant inflation, which rose following the pound’s immediate fall after the Brexit vote.
Soros said: “Economic reality is beginning to catch up with the false hopes of the general population. They believed the promises of the popular press that Brexit would not reduce their living standards, so they managed to maintain those standards by running up their household debts.”
“Once the experience of June is repeated in subsequent months, households will realise that their living standards are falling and they will have to adjust their spending habits.
“To make matters worse, they will also realise that they have become over-indebted and they will have to pay back their debts. This will reduce the household consumption that has sustained the economy even further,” he said.
“We are fast approaching the tipping point”
The Bank of England said that the amount in April borrowed by consumers and loans and credit cards was £1.5 billion last month and was up 10.3% on the year. Households are saving less than at any time on record, the Bank said.
Soros said the UK is “fast approaching the tipping point that characterises all unsustainable developments.”
He warned that Prime Minister Theresa May must change tack and approach Brexit negotiations, which began on Monday, in a “conciliatory spirit” in order to secure single market membership “for a long enough period to carry out all the legal work.”
There are signs that May has already recognised the inherent weakness of her position in Brexit negotiations after she lost her parliamentary majority in the June 8 general election. Brexit secretary David Davis was forced into a major climbdown on the first day of Brexit talks when he accepted the EU’s preferred timetable for talks.
Read the full op-ed below.