Brexit Disaster Capitalism: £8 Billion Bet on No Deal Crash-Out by Boris Johnson’s Leave Backers
While the Prime Minister defies the law and insists Britain will leave the European Union on 31 October, his backers stand to make billions out of the disaster.
Boris Johnson’s leadership campaign backers in the City stand to make billions of pounds from his ‘do or die’ pledge to take Britain out the of the EU by the end of October, Byline Times can reveal.
On the day Johnson was announced as Prime Minister by his party on 23 July, it was reported that “more than half of the donations received by Boris Johnson originated from donors with ties to the City”. However, this newspaper has discovered that this figure is actually much higher – and that many of the hedge funds involved are set to make a killing from his hard-line approach to Brexit.
According to the records of both the elections watchdog, the Electoral Commission and the Register of Financial Interests, between 10 May and 23 July, Johnson received £655,500 in donations. Of these, two thirds – £432,500 (65%) – came from hedge funds, City traders or the very wealthy.
Under the 1922 Committee’s rules governing the Conservative Party leadership election, spending is capped at £150,000 per candidate, so that all contenders have an equal chance of competing. However, these limits only apply to the short campaign, which began on 7 July and excluded the period in May when Johnson announced his long-anticipated leadership bid. £318,000 of the donations were submitted late, after the leadership election result had been announced. These late filings conceal a significant trend.
Many of these late donations were from hedge funds and people that Johnson worked with on the Vote Leave campaign during the EU Referendum, which was run by his current Chief of Staff in No.10, Dominic Cummings.
Crispin Odey, Paul Marshall, Peter Cruddas, Jon Moynihan, Jon Wood, Robin Birley, David Lilley, Philip Harris, JCB and The Bristol Port Company all donated (directly or indirectly through companies they and their co-directors are involved with) to Johnson’s leadership campaign and also contributed more than £2 million to the Vote Leave campaign.
History Repeats Itself
The current speculation on short positions – in which hedge funds make money on prices going down – is almost identical to the hedging which occurred around Brexit during the EU Referendum. Byline Times has reported previously on the vast windfalls that Vote Leave backers accrued back in 2016.
At the start of this year, a number of hedge funds – including that of Crispin Odey who made £220 million on the night of the referendum result – announced that, in their view, Brexit wasn’t going to happen and that they were going to take bets out on sterling going up.
The firms that have taken out short positions over the past six months include many which either directly, or through their directorships of other companies, also donated to the Vote Leave campaign in 2016 and were involved in taking out short positions on the referendum result.
(See Editorial Note below for correction of original version)
Invested in a No-Deal Brexit
So, how much are these firms set to make from Boris Johnson’s ‘do or die’ approach to Brexit?
From the financial data publicly available, Byline Times can reveal that currently £4,563,350,000 (£4.6 billion) of aggregate short positions on a ‘no deal’ Brexit have been taken out by hedge funds that directly or indirectly bankrolled Boris Johnson’s leadership campaign.
Most of these firms also donated to Vote Leave and took out short positions on the EU Referendum result. The ones which didn’t typically didn’t exist at that time but are invariably connected via directorships to companies that did.
Another £3,711,000,000 (£3.7 billion) of these short positions have been taken out by firms that donated to the Vote Leave campaign, but did not donate directly to the Johnson leadership campaign.
Currently, £8,274,350,000 (£8.3 billion) of aggregate short positions has been taken out by hedge funds connected to the Prime Minister and his Vote Leave campaign, run by his advisor Dominic Cummings, on a ‘no deal’ Brexit.
Does this £8 billion bet explain why the Prime Minister has said that he would rather “die in a ditch” before asking the EU for an extension? Is it the reason why Johnson is willing to defy the Benn Act that stops a ‘no deal’ Brexit? Is the £8 billion any kind of motivation to prorogue Parliament?
Under the Ministerial Code, Government ministers must have “no actual or perceived conflicts of interest”. But what could be a bigger conflict of interest than those bankrolling the Prime Minister also having a vast financial interest in a catastrophe for Britain?
Byline Times has approached Boris Johnson and the Cabinet Office for a response, but has yet to receive a reply.
This article was corrected at 17:04 pm on 11/09/19 to reflect the full sterling amounts in the short interest tracker.
**EDITORIAL COMMENT: the two graphs showing the frequency of short positions are contested by the Financial Times Alphaville and Fullfact. Byline Times has approached two independent statistical and financial experts with our underlying data researched over many months to understand why others cannot reproduce our results. They cannot detect any upturn in short positions over the summer so we have removed that section and added below. However, the general frequency of short positions around the Johnson leadership campaign is not the main revelation of this article, and both the volume of hedge fund and city donors contributing to his leadership campaign, and the short interest positions of their related firms remains uncontested.
REMOVED SECTION 30/09/19
Between January to May 2019, less than 10 short positions were being taken out by hedge funds per week. However, that all changed dramatically when Boris Johnson announced that he was running for the Conservative Party leadership on May 16. The number of short positions thereafter doubled, tripled and quadrupled and, by the time of his victory was announced, had risen to around 100 per week.
The firms that have taken out short positions over the past six months are almost entirely dominated by those which either directly, or through their directorships of other companies, also donated to the Vote Leave campaign in 2016 and were involved in taking out short positions on the referendum result.