Two months ago the UK voted in favour of Brexit. This result lead to a sequence of events, including the pound dropping to thirty year lows, the FTSE 100 losing £100bn in value over the following days, and the Prime Minister resigning.
The process to leave the EU is by invoking Article 50, the agreement that allows a member to leave. At this stage Article 50 has not been invoked, and current talk is that this will not happen until the UK is properly prepared for the event. 2017 has been banded around, but no commitment has yet been made. Some politicians are only saying that it will be triggered before the next election, which is not due until 7th May 2020.
While we are in this no-man’s land of voted to leave, but not left yet, how are things looking? Immediately after the referendum, economists were talking doom and gloom, but we have seen some post Brexit economic data showing some strength in the economy. This is partly because our exporters are finding it easier to sell their goods abroad, as the Pound has dropped over 10% against all the major currencies. Domestically we have seen Persimmon, the house builder, report that buyers are returning to the new home market. Also, the supermarkets had a good August, with a bit of help of the feel good factors of decent weather and an uplifting Olympic Games, thanks to the performance of Team GB. Backing up the supermarkets´ figures is the fact that credit card use has been strong since the Brexit vote at the end of June. The strong economic data may just be enough to halt a further drop in interest rates from the Bank of England.
In currency terms we saw the Pound fall 11 ½% and 13 ½%, respectively, against the Euro and the US Dollar in the couple of weeks after the vote. There has been a small recovery since then, with the Pound rising 1 ¼% and 2 ½% against the Euro and US Dollar. The Pound has found recent strength; not only in strong economic data, but also in the trouble the Bank of England is having in fulfilling its QE programme. The Bank is trying to put more money into circulation by buying Gilts (bonds issued by the British Government) from the market, but investors holding relatively high yielding Gilts do not want to sell them. If the programme fails this will be a big boost to the British Pound.
The damage done to the Pound will take a long time to be undone, even with a flow of good news, and the long shot of not even leaving the EU.
With all the uncertainty surrounding the UK and the value of the Pound after the Brexit vote, ex-pats should use a foreign exchange specialist like Infinity International to exchange your currencies, as it means you have access to expert guidance on the markets and when to make a money transfer. The cost saving can be up to 5% compared to your bank when using a local currency specialist, because the exchange rate will give you more currency, and the currency company will organise cheaper banking fees than is normal.
For free advice in Spain please call Glenn or Adam at Infinity International on +34 966 260 777, or email us on firstname.lastname@example.org
“Opinions expressed are solely my own and do not express the views or opinions of my employer.”