Brexit: Keep Calm And Carry On

Expat Briefing Editorial Team, 15 July, 2016

Britain's decision to leave the European Union has understandably prompted frenzied speculation within the community of British expats living on the continent about how Brexit will affect them, and what they can do to mitigate any negative consequences. However, rather than make any decisions which could turn out to be misguided ones, expats are being urged by the UK Government and financial advisers to hold their nerve, and wait and see how the process of Brexit pans out.


How Long Will Brexit Take?

It's the proverbial 64,000-pound question. But nobody can give you an honest answer, because it all depends on when the British Government chooses to start the ball rolling on its exit negotiations, and whether the UK will be granted extra time to come to a satisfactory divorce settlement if the initial deadline is missed.

Finally, with Theresa May installed as the country's new Prime Minister with a mandate to lead the Brexit negotiations, the UK is inching along the road to severing its 40-year membership of the EU following a period of political limbo in which there was an almost complete absence of leadership. However, in order to start the process, the UK must invoke the much-discussed Article 50 of the Lisbon Treaty, which essentially gives the UK two years to reach a withdrawal agreement with the remainder of the EU, and May has indicated this won't take place until 2017.

Probably the worst case scenario is that the UK and the EU fail to reach an agreement within this time, in which case the UK will simply cease to be an EU member – although exactly what that would mean is unclear. This outcome would leave the position expats highly uncertain, both from the point of view of British nationals living in the EU, and citizens from EU member states in the UK. The two-year negotiating deadline can be extended if all member states agree. But if an extension is eventually needed, unanimity is by no means guaranteed.


So What Should Expats Do Now?

In a word – nothing. Because there's really nothing they can do to second-guess the outcome of an unprecedented event with an unknown outcome. At least that seems to be the advice of the UK Foreign and Commonwealth Office (FCO) which – somewhat belatedly it has to be said – launched a webpage on July 11 containing advice for British nationals travelling or living in Europe.

"The negotiations to leave the EU may take up to two years or more," the FCO confirms. "In the interim there will be no immediate changes. During the period of the negotiations, the UK remains a full member, entitled to all the benefits and obligations of membership of the EU."

The FCO points out that British nationals can continue to travel freely within the EU using a UK passport, and that there will be no visa requirements for Britons entering another EU country.

Importantly, British nationals retain their legal status as EU citizens and can continue to work and live in EU countries, and can continue to retire and collect their pensions in EU countries.

It may be the case that UK nationals retain all or some of these rights after Brexit. But at this stage it is impossible to say.


What's The Impact Of Brexit Going To Be On An Expat's Health?

The FCO online advice page also stresses that British nationals can continue to receive healthcare in EU countries, including during temporary visits to EU countries using the European Health Insurance Card (EHIC).

However, as we continue to speculate on the final outcomes of the UK's Brexit deal, some say that the protections afforded by the EHIC card to British nationals living, working or studying in the EU could be one of the first entitlements to go. The consequence of this would be that UK nationals would probably have to rely much more on private health insurance in order to guarantee access to medical services in the EU, and help them meet the eventual costs of treatment.

Joe Thomas, Business Development Director at APRIL International UK, the global private international medical insurance provider, comments: "The UK Brexit vote will raise a number of questions about health insurance for UK nationals in Europe, both working and retired, over the coming months, but it is too early to say yet what the outcome might be. If the EHIC regime is dismantled, for example, that would suggest a significant increase in demand for both short term and travel insurance cover, as those who historically have relied upon EHIC for emergency protection would need to look elsewhere."


And What About Expat Wealth?

Predictably, the outcome of the UK's EU referendum sparked a great deal of volatility in the financial markets. As many had predicted, sterling has fallen considerably in value – a weak pound being the perennial fear of the expat Briton, as they watch their buying power fall, and cost of living rocket. Yet, one mitigating factor is that things could be a lot worse. Given the apocalyptic visions of post-Brexit economic devastation described by some members of the Remain campaign, including prominent former members of the UK Government, the markets appear to have largely settled down. And while the pound has hit a 30-year low against the US dollar, sterling's value did not crash to the extent that many doomsayers were predicting. And, markets being the cyclical beats that they generally are, a weak pound is likely to be a temporary state of affairs. Still, a nagging sense of uncertainty remains, and naturally many people are worried how Brexit will affect such things as their pensions and – another perennial obsession among the British – property values in the UK.

There is certainly plenty of evidence that investors are pulling out of UK property funds as a result of the UK's Brexit vote. According to analysis by, the number of trades on its online investment platform increased 175 percent between the weekend prior to the Brexit vote and the weekend which followed it, with 76 percent of withdrawals being from UK property funds and 22 percent from UK equity funds.

Indeed, investors had already been reducing their exposure to the UK in the weeks leading up to the referendum, with investments in UK funds on the platform falling 63 percent in the month preceding the vote. Tellingly, in the three months before the referendum, the levels of new investments in cash grew a staggering 408 percent.

Stuart Dyer,'s Chief Investment Officer, commented: "UK investors' fears about the prospects for property are striking. Clearly, there are worries that property would be affected by a possible economic downturn and the withdrawal of foreign investors."

However, Dyer said that investors should not be "too hasty" in trying to predict the outcome of Brexit on their investments.

"Property and other asset classes have their roles to play in a balanced portfolio invested for the long term," he observed. "Diversification helps to reduce both the impact of volatility and risk."

Yet, investors are clearly anxious, as demonstrated by rplan's own figures, and widely reported events like the week-long suspension of Aberdeen Asset Management's property funds, caused by a spike in requests from investors to redeem their shares.

So, is the UK on the precipice of another property market crash? Certainly, many estate agents and property experts have reported that enquires have dried up. Recent figures from the Royal Institute of Chartered Surveyors (RICS) would appear to bear out the anecdotal evidence, with RICS having found that buyer enquiries fell for the third consecutive month in June to their lowest level since 2008. But at the same time, uncertainty fueled by Brexit is hitting supply as sellers wait on the sidelines and watch the lay of the land. According to the property supply index compiled by online estate agents HouseSimple, 68 percent of UK towns saw new property listings fall in June 2016, with supply falling by 13 percent in London.

What impact is this having on prices? Well, RICS's latest survey suggests that house prices are still rising, albeit at a reduced pace. London is the only region where prices fell in the month of June. Nevertheless, the expectation is that prices will begin to fall in the months ahead, with 27 percent more respondents to RICS's survey anticipating falling prices in the next three months than those foreseeing prices rise. Over the next 12 months, sales expectations have turned negative for the first time in four years, with 12 percent more contributors expecting transactions to fall rather than rise.

To talk of a crash however, might be over-egging the pudding somewhat. RICS's survey shows that the dip in prices is only expected to persist in London and East Anglia over the next 12 months. Longer term, prices are still expected to rise, albeit a little less than previously anticipated, with a cumulative increase of 14 percent projected for the next five years.

Nevertheless, what happens to the property market could depend heavily on how Brexit affects the UK economy in general. Fears are growing that the country could enter a recession as companies and investors put their investment plans on hold, which could lead to job losses, falling incomes and, ultimately, falling property prices.

Nevertheless, as to the wider world of personal investment, Nigel Green, founder and CEO of deVere Group, which has USD10bn under advice, echoes Dyer's sentiments that panicking is not the answer.

"Britain's decision to drop the Brexit bomb and abandon its four decades of EU membership has, of course, been fueling turbulence in the global financial markets since even before the outcome was officially announced. Against a backdrop of reeling markets and uncertainty, individual investors are, understandably, feeling nervous about their future financial security," he said.

However, as far as Green is concerned, for investors, the message is clear: "Keep calm and carry on."

"Hasty decisions are typically not the wisest ones. There remains too much uncertainty around at the moment to take strong bets on any particular asset class, sector or region," he noted. "The market volatility may indeed be an indicator of storm clouds ahead, but equally, and perhaps even more likely, it will present a positive buying opportunity. But we need to wait for the fog to lift a little first."

Green suggested that a buy-and-hold strategy of quality diversified funds "is as valid a strategy today as it has ever been."

"Yes, the political landscape has changed overnight, but your financial objectives have not."

"All too often even experienced investors focus on the short-term too heavily in times of market volatility of the kind we are now seeing, and there are many disadvantages to this."

"For instance, a short-term investment strategy involves considerably higher risks, compared to investing over a longer period.  Other pitfalls of a short horizon include that investors can often sell a quality investment too early due to over focusing on short-term valuation metrics.

Nevertheless, Green cautioned that investors will need to remain cognizant of important geopolitical factors that will influence markets. "These include China's economic growth, the possibility of Brexit contagion as other countries seek to exit the EU, the US election, the failure of negative interest rates in Japan and the Eurozone to stimulate sustainable recovery, and the Fed's nervousness over the US economy."

And we thought there was only Brexit itself to worry about!

Tags: speculation | interest | Investment | Pensions | Europe | Invest | Other | Expats | Health Insurance | Investment | Pensions | Wealth | Insurance | pensions | investment | Japan | China | services | insurance | trade |


Features Archive