It’s difficult to believe it but Brexit is (probably) now only a matter of weeks away. As the 29th of March (probable departure date) approaches, we still don’t have a very clear picture of what life is going to be like after the UK departs the EU. However, despite this, it’s becoming increasingly important for everyone to be prepared. Whatever your income, occupation or family situation it’s likely that leaving the EU will adversely affect some aspect of your life. So, how can you prepare your household for Brexit, whether it ends up being a no deal or not?
Brexit Day (29th March)
This is the official leave date for the UK to break up with the EU, subject to any final agreed delay. On the day itself, asssuming an “orderly Brexit” , – and in the immediate aftermath – nothing significant should change if you’re not leaving the UK. The EU Withdrawal Act 2018 sets out that, whether there is a deal in place for Brexit or not, the same rules and laws will apply the day before and after the exit has taken place. Significant changes, it says, will be then agreed over time. However, the UK government is not entirely in control of how the exit from the EU pans out – much of this depends on EU countries and whether they will continue to keep importing and exporting, as well as overlooking details such as travellers using British driving licences. The government has emphasised that its focus is on stability. However, it has stated that its “continuity approach does not mean that everything will stay the same.” Instead precautions have been taken to allow for a period of transition. For example the Temporary Permissions Regime enables EU firms and funds passporting into the UK to still deliver services in the UK for a temporary period. So, initially at least, regular consumers aren’t likely to notice too much change.
A “disorderly Brexit” (the no deal Brexit which people talk about) where the UK crashes out without a deal will be much more damaging. This is why some politicians are seeking to get this option removed from the table. If a no deal Brexit occurs then expect highly disruptive customs checks leading to shortages of some fresh produce, food price hikes, and a fall in the value of sterling. It could even trigger a recession.
Do we need to start stockpiling?
Around 300 readers recently contacted a national newspaper to say they had started stockpiling food. This was after the National Farmer’s Union said that the UK could actually run out of food in a year after Brexit (if the government is not able to maintain the flow of goods). However, the risk of services failing or supplies running low is relatively low. So, for now at least you don’t need to stockpile beans, start your own small farm in your suburban garden or – as one spoof article suggested – conserve your toilet water and recycle it for use elsewhere in the home. However, there are some steps that anyone can take right now to help prepare a household for Brexit, despite the fact that none of us currently know whether that will be with a deal or without.
What To Expect After Brexit Day
- Foreign currency. One of the ways in which the Brexit vote had a big impact for British consumers was on currency. The pound has fallen substantially against the Euro in the wake of the 2016 referendum and could experience another crash after the actual exit takes place. The most immediate impact of this will be felt by anyone looking to travel to the EU – holidays are likely to become more expensive this year – or those buying from, or selling to, countries within it. If you’re concerned about the impact of this change then buy your currency or book your holidays now.
- Interest rates. In November 2017, the Bank of England increased interest rates for the first time in a decade. Another rate rise has been forecast for as early as May this year if inflation and UK currency take a hit. Another rate rise will positively impact savers but not those with mortgages or unsecured debt. If you want to mitigate the effects of interest rates then now is the time to remortgage or clear your debts.
- Although most experts agree there isn’t an imminent need to start stockpiling supplies there is a chance that the way we buy food may need to change after Brexit. Currently, around 30% of the food consumed in the UK has been imported from another EU country. 40% of the vegetables we consume here have come from the EU and 37% of the fruit. If you’re a fan of bacon then it’s worth noting that 55% of pig meat comes from the EU. While supplies are unlikely to run dry – especially as the government is rumoured to be urging food companies to stockpile ingredients – it’s possible that prices will increase. So, bacon, for example, could soon become a product that is just too expensive for the average household. Sugar is another ingredient that might be in short supply after Brexit as the UK only produces 900,000 tonnes of refined sugar a year. If food supplies are of serious concern to you then you could consider freezing your favourite imported products.
- Energy supplies. Although there have been whispers about an energy crisis after Brexit this is unlikely to happen. It’s true that the UK imports 36% of its energy from overseas but that isn’t all from the EU. What may have an impact on energy is the fact that we’ll be leaving Europe’s internal energy market as we step out of the EU. The effect of this could be an increase in the cost of electricity. For anyone very concerned about the implications of this, a back up generator is a good idea to cope with both energy shortfall and price increases.
- Perhaps one of the post-Brexit supply chains that has caused the most concern is pharmaceuticals. Without a deal in place there could be difficulties getting certain medical supplies into the country and we don’t currently have sufficient volume for our own population within the UK’s borders. There’s not a lot that patients can do about this, as the NHS won’t allow anyone to start stockpiling drugs. However, most big drug companies have already take steps to ensure that their product can get into the country no matter what is happening politically – and they are allowed to stockpile. Plus, this is one area where the government has been very proactive to make sure that shortages don’t arise – apparently planes have already been chartered to ensure that essential medicines can be brought into the country where necessary.
Preparing financially for the impact of Brexit
It’s household finances where most people are concerned about how Brexit is really going to affect them. So, what can you do now to protect yourself and your loved ones as far as possible?
- Review your investments. Although no one can predict what the stock market will do with great accuracy, if you’re investing in companies that are likely to be impacted by UK-EU relations then your investments are higher risk.
- Get to know your pensions. As a result of the above, find out where your pension funds are being invested to understand how much risk exposure there is in the event of a difficult Brexit.
- Re-evaluate your weekly shop. Start looking at the labels of what you purchase and find alternatives that have been grown locally or in the UK. If there are EU made products you don’t want to have to pay more for after Brexit then it might be a good idea to buy a small supply now. Three-month’s worth should give the dust time to settle.
- Tighten your belt. Life could become more expensive for all of us post-Brexit. So, now is the time to reduce spending and start putting away more cash for a “rainy day.”
- Clear some debt. If you have multiple credit sources, identify the one with the highest interest rate (e.g. credit cards) and try to clear some of this before March 29th. This will help to reduce the exposure that you have to an interest rate rise if it comes at any point this year.
- Buying or selling property. There is no clear way to deal with Brexit uncertainty when it comes to property. Some advocate buying now, others say there is a crash coming after Brexit, which will create some fantastic deals for buyers. If you’re selling a property then many experts advocate waiting until Brexit has passed in case the property just gets stuck on the market as buyers are too cautious to make big decisions before April this year.
- Create a financial plan for the year. As in any situation of uncertainty, having a plan not only helps to achieve objectives but can also reassure and make you feel more confident about the future. Include a budget that is likely to be realistic no matter what type of Brexit we end up with, a schedule of debt repayment and ideas for generating income so that you can increase savings if interest rates do rise etc. Make a list of all the factors that could potentially negatively impact you financially, as well as any possible opportunities.
Given how difficult the government has found it to establish any clarity when it comes to Brexit, it’s not surprising that consumers are struggling too. Although there are no definite solutions to the Brexit issue these are some of the steps you can take to ensure you have a fighting chance.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam
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