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How a No-Deal Brexit May Affect Your Finances

Brexit is looming and tensions are running high. With only seven months left until the deadline for Brexit, politicians are concerned about whether or not a deal will be successfully negotiated, leading to more concerns about the likelihood of confirming an EU trade agreement before next March.


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.


It’s getting down to the wire on a Brexit deal, and to ready the masses for the possibility of no-deal and its impact on the public sector, 25 positioning papers have been produced.

These detail the effects on industries from nuclear power, organic farming, and medicine, just to name a few. Also included in this is guidance for all UK and British firms in the financial services sector that operate within the European Economic Area.

It’s chock-full of incredibly useful information – but rather than wade through the publications yourself, we’ve highlighted the major areas of potential impact.


Overall Impact

Essentially, UK companies offering their services to EU-based customers, regardless of expat status, might be affected, but it will depend on a few factors. The first is that the EU must explicitly agree to let the company conduct business as usual, but as of yet the EU has not agreed this.

Secondly, if the company can establish an EU-based subsidiary then they can move European operations under it. If absolutely nothing is agreed by the deadline, then services to EU customers will be cut off.

On the flip side, those UK customers that are serviced by a firm in the EU will eventually have complications, but not right away. A three year grace period, commencing 29 March next year, will be granted to EU companies so they can keep operating legally in the hopes that they will apply for and be granted official UK authorisation.

The situation that will befall banks after a no-deal Brexit is not limited to them – every area of the financial services sector will suffer the same fate.

To avoid companies ceasing operations, we’ll cross our fingers that an agreement can be reached. In the meantime, we break down areas that you’ll want to consider before the Brexit deadline.


Investing:

  • In the event of a no-deal outcome, European companies may lose the privilege of trading on the London Stock Exchange and other UK markets.
  • Individual investors may have their funds switched to other portfolio management services which could result in loss of access until trade terms are negotiated.

Pensions:

  • UK expats living abroad in the EU may lose access to services (including annuity payments) from UK providers if those companies fail to set up a European subsidiary. However, some countries have already agreed to be accommodating in the event of law changes.
  • This creates a catch 22 – a UK provider would be breaking EU law if they continue to service expats, but they would also be breaking UK law by discontinuing service.

Mortgages:

  • Since most mortgages are already serviced by UK-based lenders, there won’t be a direct effect on borrowers.
  • However, if trading becomes difficult because of new restrictions from Brexit, the price of mortgages may be impacted in the long-run. This could result in the pot of lending money currently available diminishing quickly, which will increase rates and fees down the line.

Savings:

  • As with mortgages, if your savings are held by a UK lender, there’s nothing to worry about, but if your funds are held by an EU provider, stay alert.
  • There aren’t currently any protection rights set in place by the Financial Services Compensation Scheme for this sort of situation, but talks are due to take place before the end of the year.

Spending in Europe:

  • Using UK credit or debit cards in the EU will cost more because of the complicated payment system cards are surrounded by.
  • Cost is currently regulated by European laws so in the event of no-deal and the loss of that regulation, the expense of using plastic might skyrocket.

What’s the bottom line?

The official advice from the government is to assume a deal will be reached – they even go as far as to label the publications as being meant for guidance only, and encourage seeking the advice of an expert to prepare for anything.

Chancellor Philip Hammond has cautioned that amongst the impact of a no-deal Brexit is the potential to eradicate up to 10% of the UK’s national income with even further “large fiscal consequences”, including an additional £80 billion of borrowing debt. While the chancellor warned of doom and gloom, Prime Minister Theresa May squashed dissenting voices by reiterating that a no-deal situation would not be “the end of the world”.

Not all areas of the financial services sector will be affected by no-deal Brexit as some others, but if your mortgage, pension, or savings may be at risk, it’s important to work with a professional to safeguard your fiscal future.

If you want to ensure your finances are no-deal Brexit proof, don’t hesitate to get in touch with us.


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