Devalued Pound Is Key to Brexit Success, Labour Donor Mills Says

  • Pound at $1.10 could spur 3%-4% growth, U.K. businessman says
  • U.K. should slow foreign takeovers with public-interest test

The key to Britain making a success of its decision to leave the European Union is to allow the pound to devalue and encourage manufacturing, according to businessman John Mills, a major donor to the opposition Labour Party.

The British economy is beset with problems including low productivity, low investment, de-industrialization and a balance-of-payments deficit totaling more than 5 percent of economic output last year, Mills, 78, told reporters in London on Tuesday as he published a study on post-Brexit economic policy entitled “Healing the Wounds.”

“The $64,000 question is: ‘Is there a way of undoing these imbalances and getting the economy to work better so that we can have decent jobs for everybody outside London to begin to address these problems that the referendum threw up?”’ said Mills, founder and chairman of consumer-goods distributor John Mills Ltd. “The real reason we’ve gone wrong is we’ve not had an exchange-rate policy which makes any sense for a long period of time.”

The pound has fallen 11 percent to about $1.32 since the June 23 referendum, providing a boost for exporters. Mills advocated letting it decline further, saying parity with the dollar could open the way to 5 percent economic growth -- more than double the rate last year. A more “politically practical” aim would be growth of 3 to 4 percent, implying an exchange rate of about $1.10. The Bank of England should be given an exchange-rate target alongside its existing 2 percent inflation goal, he said.

Foreign Takeovers

Mills, who backed the Brexit vote, said Britain should also introduce a public-interest test for foreign takeovers of U.K. companies and assets, without “pulling up the drawbridge” and retreating into protectionism.

“The main thing you need to do is to stop financing this huge, huge deficit by selling assets,” Mills said. “No other country in the world would allow their assets to be bought at the same rate we have. France wouldn’t let a yogurt company, Danone, be bought on the grounds that it was a national asset. The Americans wouldn’t let their ports be bought by the Dubai consortium because they thought it was a security risk. In Germany, it’s much more difficult to have companies taken over. Whereas we’ve been selling off everything off wholesale.”

Mills, who has given Labour almost 1.7 million pounds ($2.2 million) since 2013, said he hasn’t decided who to back in the leadership contest pitting incumbent Jeremy Corbyn against challenger Owen Smith, the party’s former work and pensions spokesman.

At the same time, he called Smith’s support for a second referendum once the Brexit package has been negotiated a “dismally bad idea.”

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