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On Thursday 23rd of June, the United Kingdom took to the polls to decide if they were to remain in or leave the E.U. The referendum, dubbed as Brexit, had a turnout of 71.8% (30 million people) and the Leave campaign won by a slim margin of 52% to 48%. The question on everyone’s mind is what happens next?
We have compiled and answered a list of questions to help you understand the current situation and what you can expect to happen in the upcoming years.
Do I need to move if I live in the UK as a foreigner?
Britain has an estimated 3 million European citizens currently living in the UK and the Brexit vote has justifiably caused them some concern. What does Brexit mean for their right to live and work in the UK? There has been a range of different theories about what’s to happen to them, which has caused quite a bit of confusion.
The future of foreign residents will depend on the post-Brexit deals forged between Brussels and London. There will likely be an immediate distinction made between existing residents and potential new arrivals before any new policies are put in place. Don't expect anything to happen overnight. The UK will remain part of the European Union until Article 50 of the Lisbon Treaty is invoked, and even then there will be 2 years of negotiations before anything is put in motion.
One thing for certain is that there haven't been any calls for mass deportation of existing foreign residents living in the United Kingdom. Even Nigel Farage, a Leave campaigner and former UKIP leader, has said that “EU migrants who have come to the UK legally will have the right to remain.”
Will the UK break up?
Much has been said about the break-up of the United Kingdom now that the referendum is over and a “leave” vote has prevailed. A big reason for the break-up speculation stems from the opposing majority votes in the United Kingdom’s four component nations. England and Wales both voted to leave the European Union, while Scotland and Northern Ireland voted to remain.
In 2014 Scotland held a referendum in which the country decided to remain part of the United Kingdom rather than become independent. Although that referendum went in favour of remaining in the United Kingdom, the drive for Scottish Independence can only be expected to gain further momentum following the Brexit vote. The leader of the Scottish National Party, Nicola Sturgeon was quick to announce plans for a second independence referendum following Britain’s vote to leave the E.U. There have also been calls in Northern Ireland for unification with Ireland, with polls suggesting a clear wish to stay in Europe.
The “Brexit” process won't begin until Autumn of 2016, and the future of the United Kingdom does seem to be pivotal to what the UK government can negotiate with the European Union.
How will Brexit affect your finances?
Now that the United Kingdom has voted leave in EU referendum, understandably many are wondering what this means for their finances.
One of the first things consumers are likely to notice is a rise in petrol prices. Crude oil is priced in Dollars, and due to the drop in the value of the Pound following Brexit, this is likely to increase the cost of importing oil.
What about your shopping bill? The fall in Sterling would typically mean that the cost of imports will be more expensive since most products are purchased in Dollars, leading to higher prices for products like electronic equipment. Having said that, retailers normally stock their inventory in advance and often have insurance policies that protect from fluctuations in currency. You may expect to see some price changes by the end of 2016 however, food prices could be affected more quickly.
There seems to be more concern about energy bills. Boris Johnson and Michael Gove (leaders of the “leave” campaign) stated that the 5% VAT on energy bills could be scrapped and ultimately save taxpayers around £2bn per year. On the contrary, George Osborne (Chancellor of the Exchequer) has stated that VAT energy bills are more likely to rise, due to a decrease in VAT bills in a falling economy.
UK residents can also expect to see higher costs of using mobile phones abroad. Recently, the European Union had voted to get rid of data roaming charges across the EU by 2017. Now that the UK has voted to leave, the government will have to negotiate a new deal which disposes of roaming charges for Brits travelling across Europe.
How will holidays and travel be affected after Brexit?
Leaving the E.U will undoubtedly affect the cost of travelling abroad for UK citizens. Considering the fall in the value of the pound, travelling has become slightly more expensive for Brits following the Brexit referendum. However, if things take a turn for the better, the economy thrives and the pound recovers, travel may actually become cheaper in the long term.
For those worrying that they will have to purchase a travelling visa to access European countries, don’t stress too much. This is a highly unlikely prospect.
How will Brexit affect the UK Economy?
After the announcement was made that the United Kingdom had voted to leave, the FTSE100 ( London's stock exchange) dramatically slumped, leading to a lot of recession fears. However, the whole process is still in its early days, and the FTSE 100 has recovered and exceeded pre-Brexit levels. That being said, there are still concerns facing the British economy. We have broken down some of the biggest ones to help you understand how the economy may be affected.
Brexit effect on the British pound
As we previously mentioned, the day following the Leave vote in the referendum, the Pound fell to its lowest valuation since 1985, at one stage dropping a total of 10%. Even before the EU referendum took place, the sterling started to slump due to the uncertainty surrounding the UK’s future in Europe.
Moody’s rating agency have also warned that in the wake of Brexit, the UK’s economic performance will be affected due to the prolonged period of political uncertainty. Economists have also stated that Britain's economy has now dropped into sixth place amongst the world's largest economies. That being said, Leave campaigners repeatedly said that leaving the EU will boost economic growth in years to come.
Brexit effect on the UK housing prices
The majority of economists have predicted that there could be a sharp drop in housing prices. The Treasury have stated that housing prices could be affected by a devaluation of 10% to 18% after two years following Britain’s decision to leave the E.U. Although first-time buyers would benefit from this drop, existing homeowners will feel the effects.
Furthermore, economists have also claimed that London could be hit hardest in terms of housing prices. The National Association of Estate Agents has claimed that London houses could lose up to £7,500 on average over the next three years, a figure that is much higher than the rest of Britain.
Brexit effect on wages in the UK
Wages are also predicted to be affected after the EU referendum. The treasury has recently estimated that wages could decrease between 2.8% to 4%. However, that being said, the UK is still a member of the European Union and will be for at least the next two years. Predicting any economic performance in two years time can be particularly challenging.
Brexit effect on taxes in the UK
Most UK taxes are set by the UK government, so no drastic change is expected to be made. That being said, the EU is about free trade, and VAT has been reconciled within the European Union since 1977. Now that the United Kingdom has voted to leave the EU, the UK now sits outside of any EU VAT trade agreement. The most concrete consequence of Brexit will most likely be the establishment of an importation VAT when goods come into the UK from Europe, and when goods from the UK go into Europe.
What happens next?
It would take a minimum of two years for the UK to leave the European Union once the infamous Article 50 is triggered. Until then, the UK will still have to abide by EU laws. During the next two years. the UK will have to negotiate trade deals, movement rights and financial regulations. There is also a belief that now that the UK has voted to leave the EU, other nations will hold similar referendums or proceed to demand more tailor made deals that benefit their nation.