The result from the Brexit referendum seems to have taken everyone by surprise, and many people don’t appear to have thought about what happens the day after a Brexit vote. Here, I share my views on what Brexit means for Australian Expats?
What Does Brexit Mean?
If you didn’t already know, the term Brexit is used to refer to Britain leaving the European Union.
The UK held a referendum on 23 June 2016 to determine whether or not the UK should remain part of the European Union. The result to the question Should the United Kingdom remain a member of the European Union or leave the European Union? was 52% leave the European Union and 48% stay.
When is the UK Likely to Leave the European Union?
Unlike a referendum in Australia, the result of the referendum is not binding on the government, although the result is hard to disregard.
There has been some discussion about a second referendum (one petition had 3 million supporters within a matter of days), or (subject to the willingness of other EU member countries) whether the UK will seek to further renegotiate its terms for membership of the EU prior to another referendum. And who knows, at the time of writing there were reports that the Scottish Parliament may even be able to veto a Brexit!
If the UK government chooses to follow the outcome of the referendum, the UK government will be required to notify the European Council of its intention (Article 50 of the Treaty of the European Union). In order for the UK to notify the EU, it will first require approval of the UK parliament.
Article 50 of the Treaty then states that the EU “shall negotiate and conclude an agreement with that state [UK], setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the union.” Any agreement reached between the EU and the UK would require approval from the European Parliament (simple majority) and 65% of the member countries of the EU.
Article 50 states that the leaving state [UK] would automatically cease to be a member of the EU two years after notifying the EU of its intention to leave or the UK and European Council agree a different date.
What Brexit Means For Australian Expats?
1. Ability for Australian Expats to work in the UK and the European Union
If you are currently working in the UK (either on an Australian passport, ancestory visa, or British passport) there should be no impact on your continued ability to live and work in the UK.
Previously, if you held a British passport, then you were also allowed to work in any of the European Union member countries. This is now likely going to be one of the bigger personal impacts for Australian Expats (with British passports) as a result of Brexit. How things will change and how quickly they change only time will tell – will Australian expats (with British passports) living in Europe but outside the UK be allowed to continue living and working in the EU without needing to apply for a work permit or residency visa.
If you are working in one of the European Union member countries via a separate work permit or residency visa on the back of your Australian passport then your ability to continue working in Europe is unlikely to change.
2. Travel in the European Union
What Brexit means for Australian expats that want to travel across Europe is little. As the UK was already outside the Schengen Area, you already needed a passport to travel to other European Union countries. Australians currently do not need a visa to visit most countries in Europe and so there is unlikely to be any impact on Australians wanting to travel across Europe following the Brexit.
3. Currency Volatility
Fortunately for the UK they did not adopt the Euro as their currency, however, since the Brexit vote, the British pound has seen its currency devalue by as much as 10% in a matter of days. What does this mean for Australian Expats? Well, if you are earning in pounds and hoping to use your income to fund further travel or to send savings back to Australia, then your buying power (or Australian dollar savings) is going to reduce.
We are also likely to see ongoing currency volatility as a result of the Brexit referendum decision. As politicians debate how to exit the European Union, and as the European Union plays politics with the UK, we should expect the British pound to go up and down like a yo-yo. Australian Expats can take measures to protect themselves from currency volatility – I have written more about that in this article. This article was specifically written about managing currency risk when purchasing property, but the principles remain the same.
If you don’t already have a international money transfer account offering much better rates than the banks, then consider opening a free account with companies like OFX or Currency Fair. It takes just a few minutes.
4. Wider Impact on UK Economy and Jobs
It is still early days to understand what Brexit means for Australian Expats in the longer term and what the economic implications may be for the UK.
A devaluation of the British pound will theoretically increase demand for Britains exports providing a boost to the economy in the long term, but in the short term it is probable that the UK economy will weaken (relative to prior to the Brexit vote).
At the same time there is talk about whether London will remain the financial capital of Europe. With the decreased ability of EU citizens to work (and potentially invest) in the UK will there be a downturn in the London property market? As the terms of the UK exit remain to be negotiated, these are all questions that are yet to be answered.
5. What Brexit Means For Australian Expats That Want to Invest
I have been asked by a number of people already, what Brexit means for Australian Expats that want to invest?
Given all the economic and political uncertainty there is likely to be high volatility in currency, share and (to a lesser extent) property markets in the UK over the coming year. If you have a short term investment horizon, you will need to expect a bumpy ride. If you are a long term investor (like myself), and maintain a fully diversified and balanced portfolio of investments, then my personal opinion is Keep Calm And Carry On!
As a long term investor, there should be a number of buying opportunities that present themselves over the coming year or two. Many of the large companies on the British stock exchange are large multi-national companies that will have little material exposure to the impact of the Brexit, but may suffer exaggerated share price devaluations in the wake of the general Brexit fears and uncertainties.
A weaker British pound means the cost of investing in UK assets (such as property) has fallen in Australian dollar terms, making it attractive for those of us not earning the British pound. There may be weakness in the UK property market for the next couple of years given the economic uncertainty, and so might present long term buying opportunities.
Current reports suggest debt is likely to get cheaper in both the UK and Australia as a direct result of the Brexit vote.
So Why Did Britain Join the European Union In The First Place?
And How Did Boris Johnson react to hearing the outcome of the referendum?
Warning : coarse language in this video.
Share Your Experiences and Concerns?
Are you an Australian Expat impacted by the Brexit vote? Share your story or concerns about what Brexit means for Australian Expats in the comment section below.
Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.