Regardless of where you live in the world, Britain’s decision to leave the European Union looks set to have a large impact on the currency exchange rate you receive when you send money in and out of the UK.
This is because, the uncertainty in the aftermath of the Brexit vote, uncertainty has driven the value of the pound down against a basket of major currencies, including both the dollar and the euro. With Prime Minister Theresa May hoping to invoke Article 50 before the end of March, great amounts of volatility are expected in the markets in the coming weeks and months, too.
Prior to the announcement of the referendum result, a poll showed that 60 per cent of people who made regular international money transfers thought that their finances would suffer if Britain left the EU.
At the time of the vote, it was also revealed that 75% of British business leaders hadn’t discussed contingency plans with the chairmen of their respective audit committees. As such, big businesses who needed international money transfers in order to complete business transactions had no plan for several eventualities, including Brexit. As such, there’s a great amount of volatility in the markets at present.
Current Exchange Risk
In the aftermath of the UK’s decision, the value of the pound fell sharply, which was incredibly unfavourable for expats earning their money in pounds but paying for goods, bills and services in another currency. This may seem like quite a niche group, but it’s actually a common arrangement. For example, British expat pensioners are paid their UK pension in pounds but pay for their bills in their currency of their new country of residence.
As a direct result of this, many of these people could find their living expenses and regular commitments such as servicing a foreign currency mortgage become incredibly difficult.
However, this is not the only group of people that will be affected by Brexit’s effect on the ability to send money overseas. In summer 2017, accessing money for holidays could be problematic, and the price of a holiday is likely to skyrocket.
Exchange rates will affect holiday spending money in a big way, and a devalued pound due to Brexit implications will likely mean that Brits visiting the continent for some summer sun will have to pay more for their euros. In the leadup to the referendum, one prominent economist put sterling’s decline against the euro at 34% if the country voted to leave the EU. This means that the price of holiday spending money would rise by a third.
As a result, it’s important that you monitor and track the exchange rate closely. However, on top of this, you must also have a plan for how to react to any changes in the exchange rate as well.
Sense Market Opportunities
Although Brexit can affect sending money overseas in a negative manner, it also provides a number of opportunities. For instance, for overseas looking to transfer their earnings to the UK, topping up their retirement savings or buying a property could be much cheaper than would have previously been thought.
In order to do this, you’ll need the help of a currency specialist. This way, you can either send a one-off payment online that exploits market conditions in your favour, make a regular monthly payment plan to help pay your bills, or set up a forward contract. Plus, by using a currency specialist, you’ll get a far better exchange rate than if you were to use a bank.
To conclude, Brexit will have a large effect on sending money overseas, regardless of whether you’re moving it for your retirement, to buy a house or even just go on holiday. So watch the exchange rates closely.