What does Brexit mean for me and my finances?

What does Brexit mean for me and my finances?

As the June 23rd referendum on Brexit approaches, and as the Pound drops below 1.40 and hits its lowest level against the Dollar since the depths of the financial crisis, one has to ask, what does this all mean for me and my finances?

In vs Out – what the specialists think

Among economists, business leaders and political specialists, the consensus is that Brexit would be negative. Of over 100 Economists polled by the FT, over 75% believed Brexit would hurt the UK economy, and the leaders of companies such as HSBC, WPP, Airbus and Ryanair have also warned against an exit – thus Sterling’s depreciation.

In terms of the trade of goods, the EU runs a surplus against the UK (Europe sells more to the UK than it buys from it), and therefore has an overall interest in maintaining good relations. With an exit, trade would continue to be governed by World Trade Organization rules which guarantee some degree of market access, but less comprehensive and secure than that of a full common market. Maintaining more flexible trade than WTO standards would depend on negotiating a bilateral treaty, and in this case the UK would not be in a very strong bargaining position: while 50% of its exports go to the EU, less than 10% of EU exports go to the UK. So inevitably, trade in goods would suffer to some degree.

The UK could seek to maintain a bilateral special relationship with the EU, as do Switzerland and Norway. However, in exchange for that relation, those two countries accept EU regulations and EU immigration and also contribute financially to the EU. In fact, per capita, Norway pays almost as much as Britain currently does. So seeking to maintain a special relationship would defy many of the arguments for exit in the first place! Britain could of course attempt to negotiate more favourable terms than those of Switzerland and Norway, but it is unclear if it would succeed, and in any case that would prolong the period in which UK-EU relations are in limbo, during which confidence and investment would naturally suffer.

Importantly, Britain is a major exporter of services – most notoriously finance, but also accounting, consulting, media, advertising, research and more. Trade in services is not as protected by the WTO, and EU countries would have an interest in requiring service companies that want to trade there to set up local offices, making life more difficult for British services companies and meaning that some jobs and tax revenues would move away from the UK to the EU.

Specialists also don’t see significant ways in which Brexit could help the economy: many of the issues that are judged to hinder British business are, in fact, domestic; the argument for how Brexit could improve trade with third-party countries is unclear; and unlike much of the EU, UK monetary policy is not strapped down by the Euro and ECB.

But will it happen?

Many political pundits argue that despite the news, Brexit is in fact unlikely. They argue that up to February 19th, when the UK negotiated certain concessions on regulations with the EU, David Cameron had to convincingly pretend to be somewhat open to an exit, if only to strengthen the UK’s hand. But having obtained those concessions, the political consensus will strongly move towards ‘In’. Furthermore, with most business interests against the exit, the ‘Out’ vote will have no serious backing.

The support for ‘Out’ has, in fact, fallen since the Feb 19th deal. At the beginning of February, polls showed a 9 percent lead for ‘Out’, whereas at the time of this writing, 38% backed ‘Out’, 37% backed ‘In’ and 25% were undecided.

Nonetheless, while momentum does seem to be positive, Brexit is still not off the table.

What does this mean for my UK investments?

If you believe that Brexit is ultimately unlikely, as do many specialists, the depreciation of the Pound and fall in the FTSE present an excellent opportunity to buy UK assets at a discount – once the referendum is ‘won’ by the ‘In’ vote, they should recover much of their losses. Were the Pound to rise back to $1.60 – it’s 2015 year-end level – that would be a 14% increase – a spectacular return for a 4-month investment.

On the other hand, the downside could also be significant – if the UK does exit, that could not only cause a further fall in the currency and stocks, but permanently hurt the long-term prospects for UK assets.

So if you don’t have much exposure to UK assets, it could well be a risk worth taking on.
On the other hand, if a large part of your net worth is already tied to the UK, it makes sense to be more conservative.

What does this mean for me and my non-UK investments?

If you are an international worker for a UK-based or connected company or have retired abroad, another point to consider is how Brexit could affect your income and your non-UK investments.

Obviously British expats living in the EU would be most affected – the right to live, work, benefit from public healthcare, and own property in each country would be up for renegotiation on a country by country basis. UK benefits that differentiate between those living in the EU and outside the EU, such as pension increases, would also be at risk.

Even expats living outside the EU could be affected. Many of those who retire abroad move their pensions to a vehicle called a QROPS, either inside or outside the EU, and not necessarily where they are living. EU-based QROPS offer certain advantages vs. non-EU based QROPS, and what would happen to those advantages in the case of a Brexit is unclear, so a retiree in Thailand with a Malta QROPS could, for instance, face some surprises.

As an expat, can I vote?

If you have been away from the UK for less than 15 years, yes, you can. Otherwise, under current laws, you cannot, although there have been political discussions for changing those rules in the case of this referendum.

Unless polls continue to move away from an ‘Out’ vote over the coming months, expect more heated discussion and market instability.


Chris has 9 years’ experience as a UK pension specialist and licensed financial advisor. He specialises in helping clients make balanced financial decisions to grow their personal wealth.

Chris is licensed with Holborn Assets, an award-winning international financial advisory firm established in 1999, with 10 offices and 15,000 clients worldwide.



Buy Property in Hong Kong. Is it now a good time to invest?

So you are considering whether to buy property Hong Kong. We review the current property market situation in Hong Kong.

How to plan for your children’s education fees

With the prices of children’s education soaring worldwide, education fees are a key factor to be accounted for in your financial planning.