Brexit has dominated the news cycle for many months, yet it seems little progress has been made hammering out a deal. If anything, the twists and turns of the negotiating process have made probable outcomes even more unclear. While incremental strides have answered a few questions, each new wave of discussion seems to unearth fresh uncertainty for UK consumers, begging the question: “How will Brexit affect my personal finances?”
What Has Taken Place So Far?
If you find yourself in the dark about your post-Brexit prospects, you are not the only one. The overall economy reflects some of the confusion surrounding the EU departure, and individual UK families are feeling the pressure, closer to home.
BBC recently published a guide explaining Brexit, highlighting its history and some of the developments that have occurred since the referendum vote that initially prompted the decision to leave the European Union. The article chronicles the ups and downs of the transition sequence, including setbacks and midstream shifts that have slowed the process.
The vote to leave the EU took place in June, 2016, settling in favour of leaving by a margin of 52 per cent to 48 per cent of voters wishing to remain. The exit date was then set for March 29th, 2019, but the date has come and gone, resulting in two extensions for the official departure.
Negotiations have been ongoing during the time since the referendum showed voters’ desire to leave the EU. The withdrawal agreement has been a primary focus of talks, attempting to outline specific conditions under which the UK will leave the European Union. A few of the noted aspects receiving attention include deciding how much the UK will pay the UK to leave, how the change will impact UK citizens living in EU countries and EU citizens residing in the UK, and how Ireland border concerns will be addressed.
A transition period was established, giving stakeholders time to work out trade deals and integrate the changes, without disrupting business activities. The transition agreement ensures sweeping changes won’t be implemented prior to December, 2020, if everyone agrees on its terms.
The agreement has been voted down by the MPs multiple times, including one draft that didn’t include the political declaration. The political declaration portion of the withdrawal agreement is a separate feature, sketching some of the possibilities for the future relationship between the EU and the UK.
Following a decision to postpone the departure date until late May, a further extension has been granted, now designating 31 October as the official date for leaving.
Potential Impacts to UK Finances
Even with the long history of negotiations and analysis, Brexit could still move forward without universal agreement on some of the important details surrounding the departure. If things do move forward without working out an equitable plan, a no deal Brexit could substantially impact the UK economy.
According to Bank of England (BoE) research, a no-deal scenario could result in an overall loss of 8 per cent of the UK economy, and unemployment could easily top-out above 7 per cent. As if that isn’t enough, it is thought the value of sterling could slide by as much as 25 per cent, responding to a no deal Brexit.
The more uncertainty that remains moving toward the departure date, the greater the financial impacts will likely be. You may experience higher credit card interest rates and transactions may take longer to process, across borders. Consumer protections may also be at risk for items purchased from within the EU.
If UK house prices drop in response to a no deal Brexit, many analysts predict the loss could be substantial, potentially creating a remortgaging crisis for owners with negative equity. In the meantime, British borrowers have access to short-term loan alternatives – even with a history of bad credit.
Despite a long history of low interest rates, following the decade-old financial crisis, a no deal Brexit could result in higher rates for UK borrowers. Climbing interests rates may affect your credit card accounts, so managing your balances ahead of the Brexit date may provide some relief from rising credit costs.
With many unanswered questions clouding the Brexit departure, UK consumers are poised for financial impacts, resulting from the split. Managing credit card debt and staying informed are two moves you can make to prepare for the pending change.