Brexit: What will change?

The vote to leave the EU caught us all by surprise. Now the dust has begun to settle I have prepared a video summarising my thoughts.

https://youtu.be/uzuJCZ942AM

I know that for many people who voted Remain the shock of the result ‘remains’ raw.  My thoughts are on a practical level rather than political.

It will be at least two years before we leave the EU but I really hope that in two months time we’ll have a new Government that can show some leadership.  It’s often best not to get too anxious about something that may or may not happen in several years time.   For the time being I don’t know what our trading relationship will be with the EU but I do know the Euro area’s biggest export markets, which are:

  1.  UK
  2. USA
  3. Switzerland
  4. China

The EU will need to sign a new deal with both the UK and Switzerland in the next couple of years. Will it really want to damage its main export markets?  I doubt it – much as they might want, at one level, to punish us to scare the others.  That said, it would seem highly likely that our access to the single market will be diminished and more difficult.

Stock and currency markets are always volatile when there is uncertainty. Figures can yo-yo up and down and if you listen to the news it can seem alarming. But the thing to remember is that if you ‘keep calm and carry on’ the markets generally also calm down.   Usually it only matters to individuals like us if you have to buy or sell stocks or currency because you don’t have a choice on the timing – e.g. a stock-based saving has to be cashed in on a specific date within the turbulent period or you have to get holiday money. For companies that have imports and/or exports as central to their day-to-day business, it can, of course, be more worrying.

However, when the dust settles the clear view can be surprising. I’m not sure that the dust has settled yet, but you may be interested to know that –at the time of writing – the Stockmarket is at its highest level this year. That said, some individual shares are a lot lower.  The £ is down 9 cents against the Euro and 12 cents against the dollar – that is a little lower but a long way from Armageddon.

Many of my clients are citizens of other EU countries and it must be very disconcerting when Ministers refuse to say you can be here permanently.  You are very welcome as clients and I know how much you contribute.  This is a very nasty human cost of politics.  What politicians want is to agree is that UK citizens can stay in other EU countries and visa versa, but this will be a negotiated agreement.  Politics is perhaps at its lowest when it results in real people getting hurt in this way, or being used as bargaining chips.

The economy is dependent on confidence. People will only invest if they are confident in the future.  Confidence has taken a hit and it is likely to lead to lower economic growth for now, so make sure your business and personal finances are recession proof.  Indeed this might be the prick that bursts the London property bubble; if so it will have a significant effect throughout the country.  The Chancellor, George Osborne, has imposed huge tax increases on buy-to-let landlords. If overseas buyers also lose their confidence in the market we could see a correction in house prices.  One positive effect is that interest rates are likely to remain low for some time to come.  Inflation may drift up as a result of the £ devaluation.

There are other changes we’ll see that affect accounting and taxes. They include:

  • This is 99% EU law.  This will drift when we leave. In particular, unpopular aspects of it (VAT on domestic fuel, the tampon tax) are likely to be removed.
  • Company accounts are governed by EU law
  • We will no longer be in the common agricultural policy or the fisheries policy
  • Some support for small businesses is provided by the EU

I have been asked if it will affect us travelling around Europe with our passports.  All I can say is that I can, just, remember a time before we were in the EU, and we did not need to apply for visas then.

I hope you find this interesting.

Let me know your thoughts.

James

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