UK shares will slump as much as 80 per cent this year as the economy shrinks and prices rise, according to Brexit-backing hedge fund manager Crispin Odey.

One of the biggest supporters of the Vote Leave campaign who is also one of the country’s top fund managers, Odey is worth about £1 billion and manages more than £7 billion for clients of Odey Asset Management.

In a letter to investors, Odey blamed Bank of England Governor Mark Carney for soaring import prices. By keeping interest rates low, Carney exacerbated the fall in the value of the pound which has increased inflation, Odey said.

“We are now destined to have a recession in the UK as well as inflation,” Odey wrote. “It will be difficult for the stock market to remain above all of this.”

Odey, who raked raked in £220 million on the eve of the referendum as shares that he had large short positions in, ie bets that they would fall, crashed.

At the time he said: “This is a good day for me. I was brave. I had a lot of clients who were angry with me but they won’t be quite so angry this morning. Life is not about being un-brave at the right time. We in the City have certain skills.”

“There’s that Italian expression,” he told the BBC. ‘Al mattino ha l'oro in bocca’ – the morning has gold in its mouth – and never has one felt so much that idea as this morning really.”

However, his main hedge fund has lost 43 per cent of its value this year. Odey, hasn’t made money at his main Odey European fund since 2014, when it gained 5.5 percent. He was down almost 13 per cent last year.

Hedge fund manager made millions betting markets would collapse after Brexit

The money manager said shares will fall after the FTSE 100 share index climbed 30 per cent over five years even as earnings fell by 80 per cent. The UK’s blue chip index has bounced 10 per cent since its lows in the days after the referendum. His fund has short positions in companies including Tullow Oil, Intu Properties, and ITV.

The FTSE 100 share index has climbed almost 10 percent since the Brexit vote.

Here is the full text of Odey's letter to clients:

“These times are getting interesting. The FTSE 100 share index is now up 30% over five years, whilst earnings have fallen by 80%. On an earnings yield of 1.6%, the stock market could fall by 80% and, provided profits did not fall, would be on a 13x P/E multiple. The Bank of England is proud that they have engineered such a pleasant result but there is now increasing evidence that this is unsustainable.

“On the back of the uncertainty for overseas investors in UK PLC following on from the Brexit result, the current account deficit is ballooning and the budget deficit is following. Carney, the Governor of the Bank of England, has responded by flooding the money markets with more cash, QE, and in the process supporting the government 10yr bond at a current yield of 1.2%.

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“However, as sterling falls against all its trading partners’ currencies, it is mechanically ensuring that inflation rises up through 3.5%. Traders have been buying into sterling weakness on the back of an 18% fall in the trade weighted index since the Brexit vote, but do they not understand that the further the pound falls, the greater the difference between next year’s inflation rise and today’s interest rates.

“Sterling is getting more expensive, the further it falls. Carney is really under pressure and should be raising interest rates, but it now looks as though a rise in interest rates will be over his metaphorical dead body. We are now destined to have a recession in the UK as well as inflation.