Brexit has happened: what does that mean to me financially?
June 24, 2016 12:50 AM Subscribe
Brexit has happened and the pound has lost a significant amount of value - but I'm not sure what this means to me (in the UK) personally. Could more economically informed Mefites explain what this means to my financial situation now, and possibly in the future? I realise that any future predictions are by their nature tentative, especially in the light of political uncertainty.
Extra info: I'm a British national, employed (for the moment), with some savings and some debts, all of which are in pounds. A secondary question is whether I should be considering doing something different with those savings (I know, You Are Not My Accredited Financial Advisor) - being British, "stockpiling baked beans and tea" is my instinctual reaction, which I suspect is not the most helpful!
Extra info: I'm a British national, employed (for the moment), with some savings and some debts, all of which are in pounds. A secondary question is whether I should be considering doing something different with those savings (I know, You Are Not My Accredited Financial Advisor) - being British, "stockpiling baked beans and tea" is my instinctual reaction, which I suspect is not the most helpful!
Anything imported is going to cost more for you now.
Anything you export is going to be seen as cheaper to everyone else. For instance, I ordered some, ah, "specialty" clothing from a UK manufacturer while the pound was in free fall a few hours ago, because it was now cheaper. If you personally export luxury goods made in the UK then you may see a boost in business. Though if you import raw materials for these things you'll have to raise prices to cover the increased cost of them.
If you have any investments in the stock market, that's gone down - both UK markets and world markets. I'm sure I'm worth less now because of this. I imagine that the world markets will recover faster than the UK markets.
Some of your banks may fall over because of this. Here's hoping none of the ones that do are where your money is.
posted by egypturnash at 1:06 AM on June 24, 2016 [3 favorites]
Anything you export is going to be seen as cheaper to everyone else. For instance, I ordered some, ah, "specialty" clothing from a UK manufacturer while the pound was in free fall a few hours ago, because it was now cheaper. If you personally export luxury goods made in the UK then you may see a boost in business. Though if you import raw materials for these things you'll have to raise prices to cover the increased cost of them.
If you have any investments in the stock market, that's gone down - both UK markets and world markets. I'm sure I'm worth less now because of this. I imagine that the world markets will recover faster than the UK markets.
Some of your banks may fall over because of this. Here's hoping none of the ones that do are where your money is.
posted by egypturnash at 1:06 AM on June 24, 2016 [3 favorites]
This is a temporary reaction to the news. Bear in mind we have just had a referendum. We have not left the EU yet and I would not be entirely surprised if Prime Minister Johnson uses the vote not to leave but as leverage to get more out of the EU. The pound will pick up. As catspajammies rightly points out the Euro is likely to fall further, against the pound as well as against other currencies, particularly if other countries seem likely to leave or even threaten to leave. Do not take any major financial decisions in the next few weeks, till we see how things are going. All sorts of things may or may not happen. The EU may unilaterally make concessions to keep us in. Osborne may go. Cameron has already said he will go but will Johnson take over? Will any major banks or other corporations leave? Will the government call an election? So much is unsure at the moment.
posted by TheRaven at 1:29 AM on June 24, 2016 [4 favorites]
posted by TheRaven at 1:29 AM on June 24, 2016 [4 favorites]
There's the possibility that the Bank of England will raise interest rates to shore up the pound. This would be reflected in consumer interest rates. If your debts have an adjustable rate, you might want to play around with your budget to see what the impact of the repayments going up a bit will be. On the other hand, your savings might make a slightly better return.
posted by penguinicity at 3:01 AM on June 24, 2016 [1 favorite]
posted by penguinicity at 3:01 AM on June 24, 2016 [1 favorite]
Working in finance here. This is spoken from an economics perspective, rather than personal narrative.
1) The pound was devalued. Would this bring about increased economic activity? Unlikely, as the devaluation was due to a demand shock (or perceived future demand shock)
2) If the pound is devalued, things are going to cost more. Groceries, everything we import. Which is pretty much most things. If you buy beef labelled as 'British', bear in mind their equipment, feed, supplies are likely to be imported. Any holidays abroad will cost more.
3) If things cost more, there will be inflation. BoE has a mandate to keep inflation to less than 2 percent. So to keep inflation low, there will be interest rate rise.
4) If interest rates rise, cost of financing increases. Your mortgage. On the plus side, house prices will fall.
Over the short term, your economic situation won't change that much. However, over the medium term (1-5 years), when the big money and investments move, there will be significant changes in currency and economic activity. Likely job losses in the UK due to lack of investment and bank regulations.
Long term is anyone's guess.
Personally, most of my savings are held in stock ISAs, using ETFs or index-linked funds of overseas stocks, shares and bonds. So they are already in foreign shares and foreign currency.
posted by moiraine at 3:27 AM on June 24, 2016 [12 favorites]
1) The pound was devalued. Would this bring about increased economic activity? Unlikely, as the devaluation was due to a demand shock (or perceived future demand shock)
2) If the pound is devalued, things are going to cost more. Groceries, everything we import. Which is pretty much most things. If you buy beef labelled as 'British', bear in mind their equipment, feed, supplies are likely to be imported. Any holidays abroad will cost more.
3) If things cost more, there will be inflation. BoE has a mandate to keep inflation to less than 2 percent. So to keep inflation low, there will be interest rate rise.
4) If interest rates rise, cost of financing increases. Your mortgage. On the plus side, house prices will fall.
Over the short term, your economic situation won't change that much. However, over the medium term (1-5 years), when the big money and investments move, there will be significant changes in currency and economic activity. Likely job losses in the UK due to lack of investment and bank regulations.
Long term is anyone's guess.
Personally, most of my savings are held in stock ISAs, using ETFs or index-linked funds of overseas stocks, shares and bonds. So they are already in foreign shares and foreign currency.
posted by moiraine at 3:27 AM on June 24, 2016 [12 favorites]
No one knows. Anyone who says they know, know even less.
posted by JPD at 6:32 AM on June 24, 2016 [4 favorites]
posted by JPD at 6:32 AM on June 24, 2016 [4 favorites]
Well, as far as the pound is concerned, I can speak from experience in Canada where we're used to our dollar fluctuating. A couple years ago we were on par with the USD, now our dollar is worth about USD$0.75, fifteen years ago it was only worth USD$0.60. It is annoying, but you adjust to it. Imported things go up in price much more quickly than they go down in price when the dollar is back up. Low dollar is usually good for Canadian exports and manufacturing.
posted by fimbulvetr at 7:52 AM on June 24, 2016 [3 favorites]
posted by fimbulvetr at 7:52 AM on June 24, 2016 [3 favorites]
If sterling stays low, hoteliers, restaurateurs and other tourism operators will benefit, as will exporters/providers of globally competitive services and IP: consulting companies, film production, etc. Manufacturers of goods aren't going to benefit as much because they import raw materials, components and services, and, also, to be frank, British manufacturing hasn't been cost-competitive for decades -- anything physical that Britain exports is because it's a unique branded good or only Britain can make it to the buyers' standard -- they'll still get better currency conversion but they won't likely sell many more units.
posted by MattD at 11:10 AM on June 24, 2016 [1 favorite]
posted by MattD at 11:10 AM on June 24, 2016 [1 favorite]
This thread is closed to new comments.
posted by catspajammies at 12:57 AM on June 24, 2016 [2 favorites]