How Will Your Finances be Affected by Brexit?

Uncertainty regarding the Brexit terms has led to fluctuations in the British economy. Here is a look at how Brexit could impact your finances.

Employment and benefits

Unemployment rates have decreased compared from last year: 4.8 percent compared to 5 percent in February 2016. This implies that Brexit has had little effect on job opportunities so far.

However, the effect Brexit will have on the employment and benefit payments in the United Kingdom is still speculative:

  • If the economy grows, opportunities for employment and wages could increase and benefit payments would possibly stay the same.
  • If the economy shrinks, there could be a rise in unemployment and wages may not be able to keep up with the cost of inflation. Benefits payments may also be decreased.

It will take at least two years for Britain to leave the European Union once Article 50 is triggered. Any changes to benefits payments or unemployment will depend on the economy’s overall performance.

House prices

Rightmove, a property website, has revealed that annual house prices are increasing at the slowest rate since April 2013.

However, the Halifax House Price Index publishes that house prices actually decreased by 0.9 percent between December 2016 and January 2017.

House prices are displaying no signs of drastically dropping yet; which is good news for existing homeowners, but are, however, less promising for first-time buyers.

Travel

Leaving the European Union could have an effect on the cost of your holidays and the level of consumer protection that you enjoy abroad:

  • Flight prices: Britain will be required to renegotiate regulation on air traffic, as part of a revised trade agreement when it withdraws from the European Union. This may mean that budget airlines will increase their prices to compensate for the restrictions on travel routes, and the pound’s instability.
  • EHIC: free or low-cost healthcare in other European Union countries are offered to citizens of the United Kingdom by the European Health Insurance Card (EHIC) Kingdom. This benefit may be removed when Britain leaves the European Union, and the cost of travel insurance could increase.
  • Travel money: The rate of the pound against the euro has been unstable since the Brexit vote, and it presently stands €1.14. It is more necessary than ever to shop around to ensure that you get the most for your money.
  • Mobile phone charges: The price of using your mobile phone abroad could increase, as caps on roaming charges may not anymore apply once Britain has left the European Union.
  • Flight delay compensation: If you experience long flight delays, European Union regulation currently entitles you to a maximum of €600 compensation. However, after Brexit, there is no guarantee that these rights will continue to protect British travellers.

Food shopping

The prices of your weekly food shop could increase, because of our reliance on food that we import from European Union countries and the weakening pound.

According to a research made by mySupermarket, food prices increased at the end of 2016 but were still 3 percent lower than they were in December 2015.

The amount that you pay for your weekly shop may be dependent on which supermarket you use. For example, Aldi and Lidl’s prices look to continue to be unchanged since they stock a small variety of products, and they do not sell branded goods.

Energy prices

Ofgem has put price caps in place for prepayment energy customers. However, energy prices are still increasing. The energy providers that are listed below are said to be putting their prices up in March 2017:

  • Scottish Power standard dual fuel will increase by 7.8%
  • Power standard dual fuel will increase by 9.8%
  • EDF electricity prices will increase by 8.4%

While British Gas has pledged to freeze their energy prices by August 2017, this is not likely to provide a long-term solution to increasing energy bills.

Changing your energy supplier ahead of price increases could help you save a lot of money on your energy bills every year.

Fuel prices

The AA’s Fuel Price Report reveals that the price of fuel has risen since the Brexit vote.

The United Kingdom average in June was 111.6p per litre. It has currently increased to 116.3p per litre.

Smartphone apps like Waze can assist you in looking for the cheapest fuel prices in your area. Shopping around for car insurance can also help you to save money on the cost of running your car.

Savings

The Bank of England has frozen its base rate at 0.25 percent as a response to Brexit, which means that interest rates on UK bank accounts have decreased.

Santander and Lloyds Bank have decreased interest rates on their current account credit balances. And Halifax and RBS have reduced packaged account rewards from £5 to £3.

Fixed term accounts could offer you a higher rate of interest. However, they tie up your money for a fixed period of time.

What about stock market investments?

The drop in the value of the pound has boosted international investments.

However, brokers consider that shares in UK businesses could drop since foreign traders are hesitant to invest in an economy that is unstable.

Pensions

Moneyfacts have confirmed that last year, current pension funds witnessed their highest returns since 2009.

However, the Office for Budget Responsibility foretells that pensioners could be worse off in the next five years.

The pension adviser of the government has also warned that the state pension age may be pushed up because of the Brexit. If migration is greatly limited, people in the United Kingdom may have to work into their mid-70s before they can retire.