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George Soros in 'Black Friday' warning over possible Brexit vote

Published 21/06/2016

Mr Soros warned that the value of the pound could plummet if the UK votes to Leave
Mr Soros warned that the value of the pound could plummet if the UK votes to Leave

Billionaire currency trader George Soros has warned a vote to Leave the EU will trigger a plunge in the pound greater than Black Wednesday - but without the benefits seen after the crisis that made him a fortune.

The veteran financier said he was certain sterling would fall steeply and quickly should voters back Brexit on Thursday, leading to a "Black Friday" scenario more immediate and dramatic than when Britain crashed out of the European Exchange Rate Mechanism (ERM) in the 1990s.

However, unlike the departure then, there would be none of the benefits to the economy seen by a devalued pound and most voters will be left "considerably poorer", he predicted.

Mr Soros said it was "wishful thinking" by many that a vote to Leave would have little effect on their personal finances, with only a lucky few City speculators in line to get rich on such a move.

His intervention comes as the value of sterling climbed on Monday after polls showed the field between Remain and Leave had narrowed.

The Hungarian's hedge fund reportedly made one billion dollars off a 10 billion dollar (£6.9 billion) bet against the pound at the time of Britain leaving the ERM.

Speaking to The Guardian, he said a devaluation in the pound would be bigger and more disruptive than the 15% drop seen in September 1992.

However, with Britain's finances in a more fragile state than then and interest rates running at record lows, there would be little room for the Bank of England to manoeuvre.

Furthermore, the resulting uncertainty would impact exporters hoping to exploit a cheaper pound, Mr Soros warned.

He told the newspaper: "Too many believe that a vote to Leave will have no effect on their personal financial positions. This is wishful thinking.

"If Britain leaves the EU it will have at least one very clear and immediate effect that will touch every household: the value of the pound would decline precipitously.

"A vote to leave the EU would also have an immediate and dramatic impact on financial markets, investment, prices and jobs.

"A vote to Leave could see the week end with a Black Friday and serious consequences for ordinary people."

Leading Leave campaigner Boris Johnson played down the significance of Mr Soros's intervention, telling LBC radio: "The people I listen to are not people like George Soros, who speculate on market movements - that's how he makes his money.

"I listen to people like Anthony Bamford of JCB, the biggest private manufacturer in this country."

Conservative peer and major Tory donor Lord Bamford wrote to his employees earlier this month urging them to vote Leave.

Former US treasury secretary Larry Summers said a Remain vote is "the only rational economic choice".

Writing in the Financial Times, Mr Summers warned: "Brexit could well be the worst self-inflicted policy wound by a G7 country since the formation of the G7 40 years ago.

"It is a risk no prudent policy-maker would take. And the risk is not confined to the UK. In the current context, Brexit would unsettle the global economy and possibly tip it into recession."

Mr Summers said markets are likely to suffer "extraordinary volatility" on a new "Black Friday" following a Leave vote, with foreign investors in UK stocks likely to "lose 15% off the bat, adding together market declines and currency losses".

The UK would be likely to enter recession, but the global effects of Brexit could "dwarf" its direct impact on Britain, he warned.

"So irrational and dangerous an act in a traditional bastion of mature democracy would prompt a global reassessment of the likelihood of dangerous populist policy," said Mr Summers.

"The result could be large and destabilising asset price declines and capital flows towards assets such as gold and the Swiss franc. A vicious cycle of falling asset prices, reduced confidence and further declines could ensue."

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