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15 Jan, 2019 15:24

Expect a wild ride for the British pound – Professor Steve Keen

Expect a wild ride for the British pound – Professor Steve Keen

As the British Parliament voted down Prime Minister Theresa May’s Brexit plan on Tuesday, analysts expect more losses for sterling amid uncertainty over how the UK’s eventual withdrawal from the EU will take shape.

Professor of Economy, Steve Keen who is the author of Debunking Economics, told RT that it’s hard to say how the vote will affect the British currency but added “definitely, expect a wild ride,” while the markets are “completely dominated with speculation.”

“With speculators gambling one can’t actually say whether it will have impact one way or the other,” he said.

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“In general, I think the pound will be at least 30 percent lower than it had been,” Keen said, explaining “I think it is overvalued and that makes British manufacturing uncompetitive…”

The professor also said that if the break with the European Union happens the pound will fall in value but “overall it won’t be a good thing or a bad thing” because it is already seriously overvalued.

The British currency has been sliding since 2008, well before the Brexit referendum. According to Keen, that means that Britain has some other serious economic problems.

“The main problem the British have had is that they made a mistake 40 years ago deciding to go with services rather than manufacturing.”

He explained that Britain is now running a substantive deficit compared to Germany which is running a gigantic balance of trade surplus.

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“So, that is the key problem for the British economy and it really has almost nothing to do with Brexit,” Keen said.

He also agreed with economists that a deal will unlock withheld investment by the UK and foreign businesses and could ultimately set the UK up to be the fastest growing major economy in 2019.

Steve Keen noted that Britain being forced to actually develop an industrial policy after having ignored it for 30 years could be a very positive consequence of Brexit. That will be a chance to “revive the British economy,” he said.

Sterling fell slightly on Tuesday after the vote. However, the British currency quickly erased its losses, rising 0.07 percent on Wednesday to $1.287 against the US dollar.

For more stories on economy & finance visit RT's business section