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How Brexit Affects the Financial Landscape

How Brexit Affects the Financial Landscape

How Is Brexit Affecting the Financial Landscape?

It’s been a headline since June 2016, whether that’s in terms of delays in the main event, talk of a new election, or even just cocky politicians throwing childish insults across parliament at one another.

One thing that Brexit will have an undeniable impact on, is the economy – not just across the UK, but internationally too. Naturally, there’s both good and bad factors at play, but exactly how has Brexit affected the financial landscape, and what does it hold for the future?

Exchange Rates

One thing that has been constantly changing since the announcement that the UK was to leave the EU is the exchange rate between the Pound and the Euro. It’s fluctuated on a non-stop basis, and at the time of writing, £1 is equal to €1.11.

The Pound may currently be stronger than the Euro, but only by a very small amount. Historically, the Pound Sterling has been stronger than the Euro, much to the dismay of holiday-goers returning home and exchanging their spare holiday cash.

On the 30th April 2016, just before the June referendum, the exchange rate was approximately £1 = €1.28. A year before that in April 2015, before ‘Brexit’ had even been coined, the exchange rate was £1 = €1.38. Noticing a trend?

a list of financial areas Brexit could impact

What Does that Mean?

The pound is undeniably losing value and is currently very weak compared to international currencies, but how does that affect you?

Well, to put it simply, we’re just a lot poorer than we were in 2015, and the pound just isn’t worth what it used to be.

Whilst it might seem like a small difference in exchange rates, when you take into consideration that in 2018, the UK imported over $600 BILLION in 2018 (approximately 46% of what was from the EU) that difference really starts to add up.

The inflated prices are then reflected in the store-price of imported goods, and we, as consumers, have to swallow the cost.

In its simplest terms, GPB is currently less valuable internationally than it used to be, so we need to spend more money on imports from overseas.

Now, this might seem very doom-and-gloom, but there are some positives to consider:

Country Trade

In the above section, we’ve looked at how the fluctuating exchange rate will affect overseas imports, but we’ve not had a look at how it will affect trade within the country.

Whilst the pound may be less valuable as an international currency, it still maintains the value on-shore. Any products manufactured within the UK using minimal imports for supplies or parts will still uphold the majority of their value. That’s not to say that prices won’t increase, just that they won’t inflate as highly as imported goods might.

This could have a knock on effect within the UK, as more people will opt to buy cheaper UK made goods. This will plant money back into our internal economy, leaving us in a stronger financial situation as a whole.

Loans and Interest Rates

Right, now that we’ve had a look at how trade is affected and how exchange rates might be impacted, we can consider the potential hit on loans and interest rates.

An increase in interest rates might be the last thing that you’d want to hear, especially if you rely on loans with high interest rates such as payday loans, or bad credit loans. Unfortunately, the truth is that it’s not been immediately obvious as to whether Brexit will actually affect interest rates.

Interest rates are defined by the Bank of England base rates, and are considered for change every single month. These are slashed to extraordinarily low rates in times of crisis or financial desperation, though the base rate has been creeping up since November 2017.

The good news is that as personal loans are not as tightly linked to the Bank of England base rates as secured loans such as mortgages are, there is less chance of any huge rate changes to be passed on.

Fixed interest loans are bound by contract, by the way – so if you have a fixed interest agreement, you will NOT be affected by changes in interest.

Our Conclusion to This

Brexit is going to continue to change the economy for a while to come, but hopefully you’ll be prepared for any changes, and can develop a better understanding of what it means for you.

This article only touches on how Brexit could affect you as an individual in terms of the cost of items, and what the Pound Sterling is actually worth. There are so many other factors at play, and we’d urge you to complete your own research too!

Just remember, the media will continue to talk about money and introduce changes based on Brexit. If you do need some financial assistance, please feel free to apply with LoanBird to see if we can help.

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