Andy jalil - andyjalil@aol.com - It is just over a year since Britain decided to leave the European Union and it’s been a somewhat turbulent time since.
The political shakeup which hit the country after June 2016 continues to affect the people’s daily lives, including their finances.
The severity of the pounds drop after the Brexit vote has already begun to hit people financially, especially now inflation has picked up the pace, which is making food, fuel and energy more costly.
The value of the pound stood at $1.49 on the day before the 23 June referendum, and now sits closer to $1.28 after going up and down right through the year.
While the weakened currency is arguably the only direct impact of Brexit so far, and means people’s money will not stretch as far when travelling abroad, there has been a raft of knock-on effects.
Investments: The market has been shaken up by the political situation, but not in the way many would expect.
Senior trader at Ayondo Markets, Vinay Sharma, said, “Initially we are told Brexit would be catastrophe, but if you look at the market’s reaction, it’s been anything but.” The FTSE 100 has rallied on impressive 20 per cent over the year, and even the UK-focused FTSE 250 index is up 14 per cent as the UK economy has stayed fairly resilient.
However, market commentators think FTSE 250 firms will start to struggle as the reality of the UK’s separation finally dawns.
Julian Howard, who is head of the multi-asset team at Global Asset Management, says the UK economy is in for a rough ride as consumers feel even more hard-pressed and business confidence continues to shift down a little, which will hurt investments in British companies.
Savings and pensions: The year has not been favourable to savers, who see no end to the almost non-existent interest rate environment, particularly after the Bank of England reduced the rate to a record low in order to fend off a recession.
Despite inflation rising, the central bank is only showing the faintest signs that it will lift interest rates soon, which is a blow for savers.
However, comparison website Money.co.uk points out that savings rates have crept up slightly thanks to the challenger banks, with the best two-year fixed rate account at present paying interest of two per cent.
Many UK pension funds have been supercharged by the fall in sterling because a large portion of the investments are allocated to overseas assets.
Jason Hollands, managing director of wealth manager Towry, warns that the gains seen over the past 12 months could be a one-off, adding, “If sterling starts to recover then the factors that worked for you this year could then work against you.” It’s been a difficult time for annuities, as gilt yields — which determine the rate of income one gets in retirement — dropped to record lows after Brexit.
Annuities rates have since recovered but still sit at historically low levels.
Property: House price growth has shrunk over the course of the year, with figures from Nationwide showing the pace of growth dipped between March, April and May — marking the worst three-month run since 2009.
In May the average UK property was priced at £208,711, up just 1.8 per cent since June 2016.
While the number of people buying and selling houses fell immediately after the referendum, activity was already falling in the light of the stamp duty hike on second homes.
The slowdown means houses are becoming slightly more affordable, which is good news if you’re looking to buy a home, particularly bearing in mind mortgage rates plummeted to record lows.
But it’s bad news for landlords, with rents falling for the first time since 2009.
Average monthly rents in London dropped to £1,502 in May from the £1,548 recorded a year earlier as the effects of a Brexit slump begin to surface.
Hannah Maundrell from Money.co.uk points out that figures on wage growth, inflation, and house prices are all based on averages, meaning how one is affected really depends on what one is spending money on.
Maundrell said, “Don’t waste time stressing about what Brexit might mean for your finances, focus on getting on top of them instead so you’re in the best possible place to enjoy whatever happens down the line.”
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