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How Brexit could impact Expats’ personal finances

As the date that the UK leaves the EU gets ever closer, it’s vital that expats are aware of the impact that the various scenarios are likely to have on their finances. In this article we look at the likely impacts for British expats living abroad, as well as foreign nationals living in the UK, and the potential options to mitigate any negative effects of Brexit.

Written on 9 November 2018

On the 29 March 2019, the UK will almost certainly be leaving the EU and expats both living in the UK and British citizens living abroad are probably going to be the people most immediately affected by the result.

Depending on which sources you read, it will either be a total catastrophe or not much will happen and while the two parties are in negotiations regarding citizenship states, rights to remain and trade agreements, the biggest impact is likely to be felt through the impact on foreign exchange.

This shouldn’t really come as much of a surprise to anybody given the devaluation of GBP against all other currencies in the immediate aftermath of the initial vote in June 2016, neither the various rises and falls in the months since.

While some minor company announcements have had subtle impacts on the valuation, by far the biggest impacts have been felt around the probability surrounding the UK leaving with or without a deal.

Using these fluctuations as a guide, while also assuming that the UK will not be remaining in the EU after 29 March 2019, it is safe to assume that a deal is likely to result in GBP gaining value, while no-deal is likely to lead to GBP losing further value, certainly in the immediate aftermath.

For many people, this may sound like something that only Forex traders will be interested in, the immediate impact will be felt among expats – and unfortunately in some cases there is not much that can be done to protect yourself – primarily because nobody really knows the likely outcome.

Cost of living

While food prices are likely to fluctuate over time, the cost of living for expats will be felt immediately, especially for those people who earn a significant percentage of their income in a foreign currency – for example British retirees receiving an income in GBP.

In real terms, if there is no-deal agreed between the EU and the UK and GBP suddenly loses value, the real value of any income received by British expats in GBP will also fall and the cost of everything local will, in effect rise.

This is going to immediately affect those on UK State Pensions, receive an income from UK rent, or receive a UK salary. This will not be limited to those living in the EU either and may actually be felt more by those living outside the EU. This is due to the expectation that the event of no-deal will most likely reduce the value of the Euro at the same time reducing the impact for those living in the Eurozone.

For foreign nationals living in the UK, a no-deal will see their spending power increase if they receive the majority of their income in a foreign currency – although over time the actual cost of living in the UK is likely to rise as the cost of imports will also rise.

Conversely, in the event of a deal being agreed, due to the initial devaluation of GBP after the initial vote, the cost of living for British expats is likely to decrease as GBP becomes worth more.

Accessing money

In the event of a deal being agreed, nobody should see any impact on the ability to access finances from accounts in the UK or any other EEA member country. This is primarily because the deal itself will almost certainly include provisions and reciprocal financial agreements to avoid a catastrophe of people not being able to pay or receive money.

It is also unlikely that the cost of card payments would significantly rise as the reciprocal agreement is likely to be similar or identical to the legal requirements defined by EU rules. However, it is feasible that banks and credit card companies could decide to increase charges to either withdraw cash or use their cards abroad.

There are cards available and money transfer services that offer bank accounts in different currencies that you may wish to consider if you are concerned about fees relating to card payments or cash withdrawals. However, it would be prudent to investigate these irrespective of how the UK leaves the EU.

While in theory a no-deal scenario would technically mean that there was no agreement for financial services this is ultimately in nobodies’ interest and therefore a “temporary permissions regime” would likely come into force that would ensure nobody loses access to the financial services they use.

Over time, as the agreement between the UK and the EU evolves, all aspects of this may change but in the short term you would most likely not be significantly impacted, providing you make sensible cash decisions.

Property prices

Depending on which sources you trust, either property prices in the UK will crash by up to 35% or very little impact will be felt. However, the UK government has not published any specific predictions about house prices as it is unknown how the supply and demand will be affected.

In truth, the only real implication for anything here is if you wanted to sell or buy a property anyway and when doing so, you should always seek independent local advice where the property is located to understand the local market conditions. Even in the UK, there are massive differences between regions, for example London prices are showing average prices falling while areas outside London are seeing average prices rising.

If you are considering property as an investment but you live outside the UK, the exchange rate fluctuations are likely to have a significant impact on your propensity to purchase in the same way as buying smaller value items. It will depend on the kind of exit that is negotiated combined with the currency that you will be using to purchase a property.

It is also worth being aware that the UK Government has announced that it is considering introducing additional Stamp Duty for non-UK residents buying property in the UK, although this has not been defined nor has a date been set for when/if this could be implemented.

Mortgages

Stepping away from currency and exchange rate fluctuations, it is widely predicted that interest rates may rise at some point. That said, nobody really knows exactly what conditions would have to be met as a result of exiting the EU that would have a direct impact.

We know from experience, immediately after the vote to leave the EU, interest rates were reduced by 0.25%, but whether this would happen again in the event of no-deal, it is unclear.

What is always prudent in such periods of uncertainty is to review your current mortgages rates and consider switching to a fixed rate for a period that is suitable for you. Use a mortgage calculator to establish what would happen if rates rose/fell and then speak to a mortgage consultant to discuss whether it is worth re-mortgaging.

If you are already using a fixed rate mortgage, be aware that most UK banks will let you re-evaluate your fixed term without penalty if you are within three months of the fixed term coming to an end.

Cost of travelling and visas

As previously mentioned, currency fluctuations will always affect day-to-day spending, including costs if you are travelling abroad. Brexit may introduce additional costs specific to people travelling between the UK and the EU.

In terms of transportation, if various costs (eg. fuel, legal requirements, licenses) rise for transportation companies (eg. airlines, trains, coaches) you can expect these rises to passed on to the consumer, if not immediately then certainly over time. Therefore, if you are planning to travel in the months following Brexit, the recommendation is to lock your transportation in early and ensure you have insurance to cover your journey.

With regards to visas and the right to stay in the UK, we already know that the UK government is introducing a scheme for EU nationals called the EU Settlement Scheme which will require EU citizens to apply for pre-settled status by 20 June 2021 and will cost £65 per adult or £32.50 per child under 16. This will not, however, apply if you already have indefinite leave to remain in the UK or are Irish.

Investments, wealth management and pensions

Confidence in various markets will always be shaken by major political and economical events. In the wake of the initial vote to leave, the devalued GBP led to an increase in value of the FTSE 100 and FTSE 250.

Considering that in the medium-long term Brexit is likely to also affect UK companies’ performance (potential increasing/decreasing costs, employment issues, accessibility to markets for trading, etc…) and the businesses are also planning for the immediate aftermath to mitigate any negative activities, it’s nigh on impossible to tell exactly how investments will perform. However, there is a degree of certainty that investments will be affected, which would also affect the performance of pension plans linked with investments.

If we look back at the year 2000 and the millennium bug – some people would say that nothing happened, while others will say that a potential disaster was averted by careful risk planning and mitigation.

In the case of Brexit, we do know that some companies may be more prone to the effects of the UK leaving the EU, especially in a no-deal scenario and may therefore become riskier investments.

As with any major political and economical events, there will be some people that benefit from Brexit and working with an independent wealth manager may enable you to spot and take advantage of opportunities. In truth, the actual impact of Brexit is very difficult to predict and any decisions regarding your investments should not be made solely on Brexit and certainly not without expert independent advice.

Regardless of your view, Brexit also provides an excellent opportunity to review your investments and get clarity on any costs and overall performance.

Request a free introductory consultation

If you are concerned about the impacts of Brexit, please remember that you are not alone. However, until the future becomes more certain with regards to a deal or no-deal scenario, the actual impact of Brexit on your finances is incredibly difficult to predict.

As such, making decisions about your finances might be as risky as doing nothing at all.

However, if you would like to speak to an independent consultant we can help. Submit your details using the form to request a free introductory 15-minute consultation with a carefully selected adviser from our network.

Once your details are received, we will ask the consultant to contact you to arrange a time to conduct your consultation.

Please be aware that, as with all things related to Brexit, the consultation will be very limited until more facts are known, beginning with the deal/no-deal scenario. Once things start to become clearer, the consultations are likely to be able to answer more of your questions relating to finance.

It is also important to add that we do not offer citizenship advice for people concerned about their right to live in the EU or the UK post Brexit.

Request a free consultation (click to show form)

Consultations regarding Brexit will be limited until more details are known about how the UK will leave the EU. However, if you have a question, we will try to help. Enter your details using the form and we will arrange a free introductory consultation for you with one of our experts.


Request a free consultation

Consultations regarding Brexit will be limited until more details are known about how the UK will leave the EU. However, if you have a question, we will try to help. Enter your details using the form and we will arrange a free introductory consultation for you with one of our experts.