Last year’s Brexit referendum has become a major challenge for the British government, George Soros says. He says that more and more British citizens start getting disappointed with the Brexit.
The world-famous financier and CEO of Soros Fund Management assumes that now the economic reality starts revealing the real state of affairs and debunk their delusions related to the happy living outside of the European Union. More than 12 months ago, the advocates of the Brexit scenario were trying to persuade people that this choice won’t affect people’s standards of living. Well, since then, the government has been trying to implement this promise at the expense of increasing the internal debt.
This plan used to work for a limited amount of time, since higher domestic consumption used to stimulate the national economy. However, at some point further down the road this plan stopped working as expected. That was the moment of truth, so to say. It is interesting to note that the Bank of England’s recent report shows that the pace of income growth has been lagging behind the inflation rate for months. This means that in reality, people started earning less than they used to. Mr. Soros assumes that the tendency will be still there for months to come. All of that will soon make British households face a decrease in their standards of living, which will make them reconsider their lifestyles, including consumption.
At the same time, the amount of bad debts those households cannot service will gradually increase in the coming months. Since they will try to reduce their debt load, this is expected to end up with much lower consumption across the UK. Since this is something that has been keeping the British economy afloat, there will be economy slowdown and stagnation, if not recession.
At the same time, the billionaire says that the BoE experts have made a mistake. They underestimated that impact of inflation. Yet, he says that there is only one way to make up for this mistake, which is to start a series of interest rate hikes. If so, British households will have to face even bigger challenges when paying of their loans.
The UK is getting closer to the critical point of economic instability, and this is aggravated by political instability in the union. So, Mr. Soros assumes that the Brexit was initially a step in the wrong direction, harmful to both the UK and the EU. And even though there is no way back, the people’s attitude to the Brexit may well change, and it is indeed changing now.
