Brexit is currently one of the most trending topics covered by all major publications around the world. However, if you’re not into politics you might find it difficult to see the whole picture. The team at MoneyTransfers.com made a simple graphic visualisation to get you up to date with the major Brexit events and the impacts it is having on the industries. The infographic covers major events and correlates to the price of GBP/USD and the GBP/EUR. It also analyses the industries that Brexit is likely to affect the most in the “no-deal” scenario.
Infographic provided by MoneyTransfers.com
What Will Happen Going Forward?
The effects of Brexit will not be felt to the fullest extent for some time still. Going forward, there will be several events that will cause the British Pound to fluctuate. At the moment, “Brexit Day” is set to take place on October 31st of 2019, but could still be delayed. Barring a delay, “Brexit Day” is the single most significant event on the way, and the Pound will certainly feel some effects.
The Pound has been on an overall downward trajectory since the beginning of Brexit. Unfortunately, no one can read the future, but the markets will always respond to unpredictability. Fluctuations in the Pound are inevitable regardless of the outcome of Brexit. The extent of these fluctuations will rely on the level of harmony in which all parties to Brexit handle the change.
Which Industries Will Be Affected The Most?
When it comes to the broader economy, most industries will be affected in some way. Of course, several industries will be hit disproportionately hard, for several reasons. EU regulations have played a massive role in the British economy for decades, and the entire landscape is about to change.
When it comes to the most vulnerable industries, these six are expected to get hit especially hard:
-The automotive industry
These industries rely heavily on the old status quo and have a painful adjustment period ahead of them. Before we can paint a conclusive picture of the exact effects Brexit will have, we will have to see how Brexit evolves going forward. For example, in the event of a “no-deal” Brexit, UK-based automakers with large markets in the EU could face new levies as high as 10%.
The automotive industry in the UK will face the prospect of increased costs for parts from Europe. British companies will also be faced with higher costs for exporting cars to Europe. The combined effect of this will be an overall reduction in productivity as British companies’ profit margins take a hit. Significant job losses can be expected in the long-term, as manufacturers cut costs. The overall impact of Brexit on the Automotive industry will be decidedly negative.
The new restrictions placed on import/export between the post-Brexit UK and EU will spell trouble for international shipments. With a hard border between the UK and EU, customs checks will be more thorough on both sides, and it will take longer for vehicles to go through checks. Both the UK and EU will have to diversify the sources of their goods as newly-imposed duties make these goods more expensive for consumers.
The weaker Pound will help British exporters get more business, as their goods are cheaper to foreign customers. The same can’t be said of importers, who’ll have many more problems as the weak Pound and increased duties for goods from the EU make imports more expensive. The same can be said for the service industries. Service businesses will have to pay new duties as well, while also having to spend more Pounds when paying for services from abroad. Because exporters will receive a serious boost from Brexit, the effects of Brexit on the import/export industry will be mixed.
The tourism industry may be hurt by higher flight ticket prices. Many EU regulations make inter-European tourism much easier and cheaper for citizens of member states. The overall cost of travel from Britain will increase, and increased costs from the other end will cause tourism into the UK to decline.
Online businesses will also be faced with some new, unique challenges. British eCommerce companies will face new regulations that British EU membership exempts them from. eCommerce products will also be faced with the same duties and shipping challenges that the automotive industry will have to deal with. Internet users in the EU won’t be able to find British goods as easily, and some web shops may be geo-blocked. Brexit won’t help eCommerce businesses and will harm a large portion of them.
The British real estate industry is expected to go through a few changes. As fewer people will need to rent a home in the UK, rent prices are expected to drop. British properties will lose some of their value, causing investors to look elsewhere, particularly to the US. Speculators in the real estate industry will be faced with greater EU regulatory scrutiny. Confusion stemming from Brexit will scare investors away from purchasing British real estate for some time. Lower prices will benefit many people, but the real estate market will slow down for a while. This will make Brexit both positive and negative for the real estate industry.
Lastly, the forex industry will be affected by the inevitable inflation that Brexit will cause. The weaker nominal exchange rate, the introduction of tariffs, and the shock of immigration fluctuations would result in an increase in prices for regular household items, contributing to inflation. You can also expect high-net-worth investors to try to short the Pound. The combined effect will be a weaker Pound, resulting in a smaller trade deficit as British importers have to pay more. Perhaps most worryingly, these negative forces present a threat to the Pound’s status as a global currency. Other countries will become far less likely to use the Pound as a reserve currency. It’s also likely that the Pound will reach parity with the US Dollar. The forex industry will be one of the most negatively affected by Brexit.
The Overall Prognosis For The Pound
Ultimately, Brexit will aggravate the pain the Pound has been facing. Brexit isn’t here yet, but the damage has already started to be felt. Once the British exit from the EU is formalised, the reality of Brexit will kick in as regulations change. If anything is completely certain, it’s the fact that the Pound will continue to shed its value against other global currencies. This fact alone has massive implications for the UK going forward. While much remains to be seen, we now have a clearer understanding of the economic effects of a British exit, no-deal or otherwise