The subject of Brexit was one of the industry hot topics during NEI’s Global Partner Alliance Summit. The discussion centered on how it happened and how Brexit would affect the British currency and economy, the housing market and immigration practices.
Stephanie Lewin, Senior Associate of Berry Appleman & Leiden, LLP (BAL), explained that on June 23, 2016, the vote for the United Kingdom (UK) to leave the European Union (EU) won 52% to the opposing 48%. For the UK to leave the EU, it must invoke an agreement called Article 50, which gives both entities two years to agree to the terms of the split.
Despite hopes of a possible second referendum, Britain’s newly appointed Prime Minister, Theresa May, said there will be no attempts to remain inside the European Union (EU). As Prime Minister, it is May’s responsibility to carry out the country’s decision and begin negotiating the terms of Brexit.
In a statement on October 2, 2016 by Prime Minister May, Britain plans to invoke Article 50 by the end of March 2017. Putting Article 50 into play triggers the two-year period the United Kingdom (UK) will negotiate the terms of leaving the EU; therefore, the separation should be complete by April 2019.
Currency and Economy
The British Pound immediately dropped by 10% after the election results. As of January 9, 2017, the pound was trading at $1.22 USD, still leaving it well below its pre-referendum level of $1.50 USD. Simon Johnston, GMS, MIM, a UK citizen and CEO of Icon Relocation, agreed with Lewin on the overall shock to the UK’s decision to exit. Although the predictions were ominous, he expressed reasons to remain optimistic about Britain’s future.
While not personally in favor of Brexit, Johnston talked about a few positives in contrast to the negative predictions. A weaker pound has led to increased tourism and exports. For example, Global Blue (tax-free shopping company) reported that since Brexit, the amount of business from Asia and the U.S. to the UK, taking advantage of the exchange rate in currency, has increased by 75%.
The residential housing market in London has continued to grow despite Brexit forecasts. In fact, the Bank of England cut interest rates from 0.5% to 0.25% to stop a recession and stimulate investments. Per Johnston, people don’t understand that the property market isn’t necessarily affected just because of Brexit, but due to these larger issues already occurring in London.
EU Nationals Working and Living in the UK
Forty-one percent of UK companies have EU employees from outside the country with concerns over residency status. Worldwide ERC® reported statistics from a survey conducted by the British Chambers of Commerce of 800 companies that showed:
- five percent of EU nationals working in the UK have already resigned, and
- another ten percent indicated they plan to leave the UK.
It is unsure if such movement is or will be corporate-sanctioned or voluntary. Many of the British expats who are impacted were not allowed to vote in the referendum, per Lewin, and she believes there may be some movement because of it.
In the meantime, the UK is paying close attention to the talks between the EU and Switzerland where Switzerland, under pressure from the EU, is revisiting its decision to start imposing a quota on EU nationals that would limit free movement of workers due to the implications it may have on talks between the EU and the UK.
The UK still has issues unrelated to Brexit, such as, extremely low interest rates which will bring difficulties when they rise, incredibly high London house prices, and new property taxes on investment properties.
As thought leaders during uncertain times, NEI will continue to update our clients on the situation. It’s not premature to begin discussions about putting policies in place that support EU foreign nationals who wish to return to the EU, or may want to stay and apply for residency and permanent citizenship in the United Kingdom.