The Brexit is one of the most highly contested political events of our time. It is fraught with difficulty, confusion, and uncertainty. When Britons voted to leave the European Union on June 23, 2016, talking heads and political pundits were convinced that the vote would be a resounding no. Instead, what transpired was an historic vote to leave the European Union by a margin of 51.9% to 48.1%. 17,410,742 votes in favour of a Brexit meant that the 16,141,241 votes opposed to a Brexit were saddled with an economic and political quagmire.
According to the results of that decision some 2 years ago, 46.6% of England voted to remain and 53.4% voted to leave. 55.8% of Northern Ireland voted to remain and 44.2% voted to leave. In Scotland, 62% of voters wanted to remain in the EU and 38% wanted to leave. In Wales, 47.5% voted to remain and 52.5% voted to leave. The vote itself was one thing, and there was mass hysteria stirred up on both sides of this prickly affair. The Pro-Brexit camp championed by the Tories got their way, but it didn’t take long before the complexities of a Brexit brought the chickens home to roost.
What issues are making a Brexit for Britain difficult?
EU talks with the UK have been hamstrung by several major obstacles, including what the UK is expected to pay for the right to leave the EU. This is known as the divorce bill, and it covers the UK spending commitments to the EU. Multiple aspects need to be factored in, including scientific research costs, current contracts, and the pensions for government workers across the EU. Fortunately for these bureaucrats, the United Kingdom has vowed to meet these commitments. Other issues include trade and tariffs, given that the European Union is the biggest trading partner of the United Kingdom. Bilateral agreements between these two economic power blocs need to be safely in place to ensure that fair trade takes place.
The rights of migrants in Britain and the European Union need to be factored into the equation. The Republic of Ireland has seen a slew of passport applications in recent months from people in the UK. Since they are scared to lose their EU membership, they are looking to secure Irish citizenship and the coveted passport. Border controls are another issue that are threatening to derail the current Brexit talks. Given that the United Kingdom and the Republic of Ireland are effectively the UK and the EU, the border with Northern Ireland is an important consideration vis-à-vis the single market. If Scottish voters decide to leave Britain this could further complicate matters.
How will international money transfers be affected by the Brexit?
Prior to the Brexit decision, companies operating in the United Kingdom and in the European Union had passporting rights to offer their services to customers in the single economic bloc. Put simply, this means that financial entities like banks, insurance companies, investment brokerages and the like had no foibles regarding transferring funds abroad. The Brexit threatens to derail the smooth processing of international payments transfers. The strength of the euro and sterling are dependent upon economic stability at home. If there is uncertainty in the UK, this means that £1 will buy fewer €1 as weakness persists. This does not bode well for UK citizens wanting to invest funds abroad at a later stage.
On the flip side, EU citizens will likely be pleased with a weaker GBP since this means that they can get more bang for their buck when they convert euros into sterling. The red tape that will likely accompany international bank transfers will add on to the costs of these international money transfers. As such, people on both sides of the equation are looking to fintech companies and non-bank entities to transfer funds. There is a growing sense of urgency among many folks in the UK to send money abroad before sterling depreciates. One of the better performing European countries is France, with the newly elected Emmanuel Macron.
Thanks to these non-bank companies, it is relatively easy to process, UK to France money transfers and safeguard the buying power of GBP now by converting it into EUR. These investments typically take the form of real estate and stock holdings. There are many advantages of shifting assets from the UK to France, including the extensive transportation network which is highly cost-effective in France. Other options include an efficient schooling schedule, and the highest number of paid vacation days in the world with a week off for every 7 weeks worked. For these and many other reasons, France is a highly prized destination for many Britons fearing the worst from a Brexit. Of course, there are some downsides such as a high VAT at 19% and a housing tax of 0.2%. Regardless, those with the money now are looking to shift it abroad at the best rates before the sterling devalues post 2019.
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