On 23rd June, Britain chose to leave the EU in a historic vote, which has caused shockwaves throughout the world. Britain will remain a part of the EU for at least another two years, during which there will undoubtedly be a period of instability and uncertainty. While Britain’s future remains unclear for the time being, Brexit’s immediate effect on your personal finances are more obvious. Brexit could affect your finances in the following ways:
1) Holidays abroad will be more expensive: In the immediate Brexit aftermath, the pound plunged sharply. It has since started a tentative recovery, with the Bank of England poised to pump £250 billion into the economy to buoy the pound. In the meantime, this means the pound will be worth less abroad, making foreign travel more expensive.
2) Immigration status will remain unchanged for at least two years: While Britain negotiates the terms of the Brexit with the EU, all of its legislation will remain in place. This means that Britain will be required to allow the free movement of EU workers. However, this could all change once Brexit negotiations are complete.
3) Inflation rates may rise, making things cost more: Inflation’s effect may not be noticeable for months, as it will probably be confined to imported goods. But, it may spread—increasing costs across the board, due to a weak pound. However, some economists encourage inflation, as it helps stimulate the economy and prevent stagnation.
4) Interest rates may increase due to inflation: As the Bank of England has an obligation to restrict inflation to no more than 2 per cent per year, it may increase interest rates to ensure that inflation remains in check.
5) Britain may experience a recession: As companies and investors are uncertain of what will happen after Britain has finalised the terms of Brexit with the EU in two years, they are hesitant to invest in expansion. Expect international companies in Britain to either scale back plans for expansion or to relocate due to uncertainty and diminished confidence. This could lead to a recession due to lower overall investment and fewer jobs for UK workers.
6) Britain will still be required to pay its contributions to the EU budget: While Britain works on finalising the terms of Brexit with the EU, it will still be required to abide by applicable EU legislation, and a part of that is paying its contributions to the EU budget.