Brexit personal investment implications

Brexit

Brexit and your personal finances

Brexit is the exit of the Uk from the EU; the final deal has not yet been finalised as of Oct 2016. The negotiation power is in favour of the EU because the UK exports 40% of its products to the EU but each country in the EU exports much less to the UK.

Advantages

  • Student housing which is already under stress will probably become more in demand. Most likely the UK will implement a migration points system which will favour students.
  • We should also expect some tax competition from the UK, in the form of lower corporate taxes; similar to Ireland’s tax policies. This will make the FTSE rise.
  • Fewer foreigners will reduce housing demand.

Disadvantages

  • The lower Pound is attracting foreign buyers to speculate in the London real estate market.
  • London would cease to function if you immigrants were removed
  • Anonymous vehicles used to buy property in London attracts certain kinds of individuals, most likely Brexit will not increase transparency.
  • There are plans to have London only visas.

Opportunities

  • Media has reported that UK farmers will have their subsidies reduced heavily in the next five years. After the dust has settled this parts of the sector that survive will probably be more profitable than before.
  • Other European cities such as  Berlin, Frankfurt, Madrid and Brussels could become the next financial hub alternatively the banks could decide to relocate to regions such as Warsaw or Budapest where the human and real estate resources are less expensive.
  • If at some point the EUR does face headwinds in the form of Italian and German banking difficulties the Sterling has the potential to rally. Although the inverse has happened up to now.
  • Investors will probably move to safer investments during the turmoil: Gold, Yen, Dollar, Bonds and possibly even Bitcoin
  • Learn a second language; there will be other employment opportunities in mainland Europe. Knowing another European language will make it easier to access this job market.
  • Diversification is the cornerstone of investing; Brexit gives you more reasons to do so. If all your assets are UK based, diversify in other countries and currencies.
  • Open a foreign bank account, this could be your lifeline in times of a UK based crisis.
Threats 
  • Tax revenues will drop which means more taxes or more budget cuts for UK residents.
  • 12% of the UKs wealth is generated by financial services if London stops being a financial hub the implications to the economy will be significant.
  • Every job created in London creates two jobs elsewhere in the UK.
  • London raised more revenue than the next 24 cities in the UK combined; these funds are being used to support the rest of the UK. If this fiscal transfer stops how will the other parts of the UK cope?
  • Monitor your costs.  As inflation costs pick up, firms will use tactics such as marketing, smaller packaging and higher prices. To convince you that everything as it was before. It is interesting to start building a deep pantry, food prices in the future are most likley to be more expensive than today.
  •  Have a private health care plan as budget cuts may affect the NHS.

 

Further Reading:

The road to Brexit: 16 things you need to know about the process of leaving the EU