Brexit. It’s The Issue of the moment. And perhaps it is even more significant amongst the estimated two million British expats residing in Europe as it could affect them in a number of different ways.
Indeed, should the UK vote to leave the EU on 23 June it could leave expats in ‘limbo’ as talks get underway and agreements will need to be reached over their rights as non-EU citizens, which could be long drawn-out and complicated.
Impact of Brexit on expats in the EU
The effect a possible Brexit would have on state pensions for expatriates residing in Europe will, of course, depend on agreements that will be put in place. As it stands, Brits retiring overseas are not eligible for the annual state pension increase, unless there is a reciprocal agreement set.
However, this only applies to countries that were EU members before 1981. Therefore, retirees in the later additions to Europe, could see their pensions frozen if Brexit goes ahead.
Currently, expatriates who are citizens of an EU country benefit from numerous rights to work and set up a business. This could, however, all change, should Britain vote to leave. Expats may have to apply for a permit, although, this is a move that could vary depending on the country.
The subject of residency is one that the majority of British expats residing in Europe are the most concerned about. The right to free movement between all EU member countries is presently permitted to all citizens from member states. Should Britain leave, this could alter.
Although it is likely that Brits already in the EU will not be affected, but those wishing to relocate in the future could need to possess a visa.
A Vote Leave campaign victory could result in EU-based expats having to pay for healthcare or purchase health insurance.
Yet, this may prove unlikely as the UK allocates a considerable amount to countries in the European Economic Area for British citizens’ healthcare. Indeed, should this not be the case, the UK could do the same and deny free medical care to European nationals residing in Britain.
Importance of ‘Brexit-proofing’
Nigel Green, the CEO of devere Group, which has 80,000 mainly expatriate clients globally, has recently warned of the significant effects Brexit would have on UK assets, and the steps investors can take to mitigate these risks.
Mr Green comments: “We have seen that the referendum and the consequent campaigning has already created considerable uncertainty, with many companies in the private sector temporarily putting investments on hold due to the forthcoming vote. This uncertainty and volatility can be expected to intensify if Britain decides to leaves the EU.
“Investors can take precautions against the potentially significant adverse effects of Brexit on UK assets by increasing their exposure to overseas investments.
“It could be a timely decision to rebalance in favour of international stocks, bonds and perhaps property.”
The deVere CEO continues: “Those investors who opt for a diverse portfolio are in a much better position to circumvent the potential pitfalls during periods of market volatility, whilst simultaneously taking advantage of the opportunities that arise.
“Indeed, distributing funds around is crucial in managing risk. A well-balanced portfolio is achieved by diversifying by geographical region, asset class and industrial sector.”
Impact of Brexit in the UK
Managing risk could prove to be vital as Brexit could hazard, in effect, a ‘technical recession’.
Bank of England Governor, Mark Carney claims that should the Vote Leave campaign triumph, it could have a “material economic impact”, leading to a drop in property prices, increased unemployment and lower standards of living.
As anxiety mounts in the lead-up to the vote, the Bank of England has cut GDP growth forecasts from 2.2 to 2 per cent, and also expects household spending to decelerate.
In addition, the Bank has also warned that Sterling could drop “sharply” – perhaps as much as 20 per cent – should Britain vote to leave the EU, resulting in a rapid rise in prices, whilst reducing growth.
Indeed, following this warning, the pound moved higher against the US dollar, as traders anticipate that the move would deter voters from favouring Brexit.
As such, policymakers would face, according to the Governor, “a challenging trade-off between stabilising inflation on the one hand by raising interest rates, and stabilising output and employment on the other by easing slackening monetary policy.”
Furthermore, the Bank of England has also hinted that a Brexit vote could trigger forceful movements in the market, at a time of diminishing liquidity that could in turn, lead to a credit crunch.
Consequently, whatever the verdict on June 23rd, expats will greatly benefit from specialist, cross-border financial advice.
Nigel Green concludes: “As we move towards the Brexit vote, financial advisers can use their invaluable industry information and experience to help investors manage the outcome of the referendum, whatever it may be, and work towards securing their financial objectives.”