The business magnate who successfully bet on the fall of the British pound in 1992, George Soros, has revealed his predictions about the fate of Great Britain and the European Union. Broaching the subjects of living standards, debt and inflation, Soros claims that the possibility of exiting Brexit is real, "The moment of truth is fast approaching.”
Great Britain had a reputation for being predictable. Policy changes were seen coming, elections weren’t generally surprising, and the European Union’s fastest growing economy kept humming. Then came the vote for Brexit, now Theresa May lost her gamble on the snap vote, but what has happened in between may be the biggest pointers for the future of Britain.
Since outpacing the rest of the Union in GDP growth after the 2008 crisis, Britain had undergone some fundamental changes to its economy. It posted GDP growth of 2.3% in 2015, 1.8% growth in 2016, a figure hit by Brexit, and now in 2017 the first quarter growth is 0.2%. The estimates released by the government for 2017 hovered around 1.4%, but this was before the Conservatives lost seats in the snap election on June 8th. Though economists show that Brexit itself has done little to hurt the economy so far, Britain is starting to struggle. Inflation is at a three year high, and earlier this month UK’s Central Bank cast a 5-3 vote against raising rates, while the rest of the world was expecting a unanimous decision. The United Kingdom is making analysts second guess themselves.
The cost of Brexit could further complicate matters, an expected $199 million increase in debt would put more strain on an already struggling economy and soaring inflation. The way to combat this would be to cut spending, or raise taxes, neither option too appealing. Unemployment will also take a hit, with uncertainty growing around the free travel agreements that the EU and Britain currently enjoy. The Office of Budget Responsibility reported estimates of 830,000 unemployment claims for 2017, compared to the previously expected 780,000. Additionally, the loss of trade that particularly a “hard Brexit” is not welcome. Chris Hare, an economist an Investec, said “…raising the CPI inflation rate to more than 3% later this year. That will squeeze household spending power,” meaning the people who may have previously voted for Brexit would start to feel the consequence.
The volatile nature of Britain’s current politics, Theresa May losing some of her negotiating power while the more liberal Jeremy Corbyn rallies the youth, and the impact of last year’s decision finally showing its ugly head may all lead to a new look at Brexit. This doesn’t mean it’s sure to happen, but the swing in political momentum may mean that there will be calls to look into exiting Brexit. Of course that would mean a difficult road back in, seeing as how the public and even the Supreme Court of UK has no clear decision on if it is even possible, although there are those who think it is. Additionally, all 27 of the other EU nations have to ratify the decision to allow Britain back into the bloc, but the good news is this seems to be the least of the hurdles according to Antonio Tajani, President of the European Parliament.