Businesspeople chatting in a boardroom

A no-deal Brexit will affect the UK economy, despite Boris Johnson claiming otherwise. Johnson, who is the main candidate to become Britain’s next prime minister, has more than once argued that a no-deal Brexit is possible on 31 Oct., or, as he promised more recently, “do or die.”

Speaking to TalkRadio, Johnson said that Theresa May’s withdrawal agreement needed more than a few tweaks, and that “It’s got to be, you know, we need a new withdrawal agreement if we’re going to go out on the basis of a withdrawal agreement.” While, on certain occasions, he gave the impression to some MPs that he was unsure about leaving the EU on 31 October, with certain MPs he was quite definite about the departure date. When he was asked during the specific interview he persisted: “We are getting ready to come out on 31 October. Come what may,” and added, “Do or die. Come what may.”

But Johnson’s stance is considered rather dangerous as many economists and politicians have argued. Let’s see in more detail, how leaving the EU without a deal will affect the UK economy.

 

What economic impact would a no-deal Brexit have on the UK?

Bank of England governor Mark Carney has rejected Boris Johnson’s claim, as he confirmed that the “UK would be automatically hit by tariffs on exports to the EU.” Earlier this week, Johnson had said that tariffs would not be paid if the UK left the EU without a deal, due to article 24 of the General Agreement on Tariffs and Trade (GATT) which covers the international trade in goods. Clearing the confusion, Carney said to BBC: “Gatt 24 applies if you have an agreement, not if you’ve decided not to have an agreement or have been unable to come to an agreement. Not having an agreement with the EU means that there are tariffs automatically because the Europeans have to apply the same rules to us as they apply to everyone else. If they were to decide not to put in place tariffs they also have to lower their tariffs with the United States, with the rest of the world. And the same would hold for us.”

A no-deal Brexit means that British exports would be hit with import tariffs which are currently around 2-3 percent for non-agricultural goods but are higher for cars and farm products. So, claims by Boris Johnson and other Brexiters saying that Britain could avoid these tariffs under world trade rules, have not only been rejected by the BoE’s Carney, but also trade minister Liam Fox, who also argued that an agreement with the EU would need to be in place.

In the possibility of a no-deal Brexit, Britain will eliminate import tariffs for many products for up to a year, something that would “reduce the inflationary hit to consumers but would expose many British companies to tougher competition.”

In a Reuters article, outlining the effects of a no-deal Brexit, it was pointed out that, based on Bank of England’s estimates, the UK economy could be shocked into a “5 percent contraction within a year, nearly as much as during the global financial crisis.” The same article also noted, that “Britain’s finance ministry says the economy could be 8 percent smaller by 2035 after a no-deal Brexit than if it stayed in the EU. The hit would be bigger if migration slowed sharply.” A no-deal Brexit would deter foreign investors, while Britain’s current account deficit would make Britain depend on, what Carney has called, “the kindness of strangers.”

Finance minister Philip Hammond has warned that a no-deal Brexit would postpone the government’s plans to end austerity, while Brexiters have argued that leaving the EU with no deal would help the public finances as the UK will stop payments into the EU budget.

 

Are you worried by a weak pound?

A no-deal Brexit would probably push the pound down, which will consequently drive inflation down.

If you are a business importing or exporting goods and services to and from the EU, you are possibly worried about an abrupt hard Brexit without a transition deal. Universal Partners FX have all the right international payments and FX hedging solutions for your business, so that you access the international market without any worries. Take advantage of their expertise in foreign exchange and get in touch with Universal Partners FX today.

Holiday home abroad

With Brexit uncertainty and Boris Johnson increasingly looking like the favourite to become the next prime minister, British citizens are concerned about the prospect of buying a property abroad. The EU is now hostile towards the Tory leadership campaign rhetoric which fails to confront the reality of the UK’s position in the negotiations, and opposes any further delay to Brexit. Amidst political and economic instability, the decision to buy your holiday home abroad can create considerable stress, especially when you have not set your finances in order.

There are obviously immense rewards, such as getting resident status or a passport, depending on your nationality or the country you are investing in. There will be carefree days in the sun and cool nights sipping your gin and tonic, as cicadas buzz in the distance. But, first, there will be bills to pay, bank accounts to open and funds to transfer from overseas, so being rational and foreseeing certain obstacles will only help you overcome hurdles easier and efficiently.

 

Knowing the law

Owning your own holiday home abroad can be a dream come true, and one that might possibly come with benefits such as a second citizenship, depending on the investment you make. But knowing early on the restrictions to rules and what comes with owning a specific property could potentially save you a lot of pain. It is always safe to get legal opinion on certain aspects of buying a property, including buying a house without title deeds, which can be a nightmare.

 

Getting a loan and property taxes

Dealing with your finances early on and finding out whether you can get a mortgage in another country is probably a good beginning, if you are trying to get things in order. As a Washington Post article clarifies, “Unless you have enough cash on hand to buy the house, you’ll be requesting a loan from a foreign bank — and it probably won’t be as easy as working with one back home.” For example, foreign banks might lend less of the total value, while there might be the financial burden of additional taxes. According to the Washington Post article, “Regardless of where you buy a home, you’ll likely be on the hook for extra taxes. Spain levies a 10 percent sales tax on real estate….Nonresidents buying in Italy have to pay about a 9 percent tax on the value of the land. On top of that, there can be ongoing property taxes.” Figuring all this out, could save you a lot of time and money.

 

Costs and Renting

From tax bills, utilities and various maintenance costs, you could be paying significant costs that can be offset by the decision to rent your home, which can be potentially profitable. But earning an income, will also be coupled with taxes, and you would need to know in which country you are paying those taxes.

 

Know and secure your rights

Depending on whichever country you are and the laws regarding owning property, many professionals specialising in tax compliance and consulting recommend that your property is listed as part of your estate and that you file a will in both countries of residence. According to certain countries, “if you don’t have a will [your home] could go to the closest relative you have in that country, which may not be where you intended it to go.”

When it comes to buying your future holiday home, you will be considering, for a large part, your financial situation and ways to navigate the complexities of a volatile market and transferring funds abroad. Universal Partners FX can tailor specific solutions to help you transfer large amounts of money internationally. From mitigating the effects of currency volatility, to providing access to the best exchange rates, UPFX can deliver the most optimal prices at the most opportune time.

 

Find out what UPFX can offer you, by talking to one of their experts today.

Buying property abroad

With no-deal Brexit being on the table again, is this the right time to buy your property abroad?

Former cabinet minister Oliver Letwin was behind cross-party efforts to block a no-deal Brexit. The Labour-led attempt to eliminate the possibility of crashing out of the EU without a deal was defeated by 11 votes, after 13 abstained and eight more Labour MPs voted with the government. Despite the efforts of 10 Conservatives who rebelled by voting against the government, the option of a no-deal Brexit is back to haunt us.

Letwin, disappointed, said that the parliament was now out of options to protect the UK from a hard Brexit, after the defeat of Labour’s motion. Talking to BBC Radio 4’s Today programme, he said: “We have run out of all the possibilities that any of us can at the moment think of.” Letwin added: “If the government doesn’t bring something before parliament, parliament won’t have a chance to take a view on that.” For him, it was impossible that Tory MPs would vote against the government to prevent a no deal scenario. Letwin said: “Evidently that’s not something any of us want to do. I’m not confident as things stand that the current Labour leadership would know how to solve this crisis either.” Letwin also expressed that he was not sure whether Boris Johnson was a “no-deal Brexiteer” but he did admit that Johnson was “clearly quite likely” the next prime minister.

Another former Conservative MP, Nick Boles, who voted with Labour on Wednesday, was vocal about the lack of options on the horizon in terms of a no-deal Brexit and said that the only alternative was a confidence vote to bring down the government. He said: “No-deal Brexit on 31 October is back to being a racing certainty. It is very hard to see where any further legislative opportunities will come from. So it’s now a question of politics – specifically whether a PM pursuing a no-deal Brexit can command and sustain the confidence of the House of Commons.”

 

Government victory: Is no-deal still an option?

Leading candidate to be Britain’s next prime minister, Boris Johnson, said that he will try to have a deal in place, but he did not explain what he would do if he could not come to an agreement with Brussels. Nonetheless, he supports leaving exactly on the appointed deadline, on 31 October, with or without a deal.

As many have argued, including Boles, the only remaining option is to bring down the government. Even former attorney general and Conservative Dominic Grieve agreed that he would vote against the government in a no-confidence motion, if someone like Boris Johnson tried to take the UK out of the EU without a deal. He said: “If we get to a point where a prime minister is intent on doing this [taking the UK out of the EU without a deal], the only way of stopping that prime minister would be to bring down that prime minister’s government. And I simply have to say here and now I will not hesitate to do that if that is what is attempted, even if it means my resigning the whip and leaving the party.” Chancellor, Philip Hammond, also suggested he might act similarly. In the possibility that the government loses a no-confidence vote, alternative leaders would only have two weeks to assemble a parliamentary majority, otherwise, a general election must be called.

 

Buying Property with Universal Partners FX

The pound fell after Labour’s motion was defeated, while markets tried to digest Boris Johnson’s campaign which was launched officially on Wednesday.

As the horizon appears to continue being clouded in uncertainty, currency volatility and market expectations will be influenced by Brexit developments. So, if you are considering buying property abroad, Universal Partners FX is the best choice to offer support, guidance in times of uncertainty and competitive currency exchange rates. Operating with no hidden fees or extra costs, UPFX are the ideal partners to help you navigate the markets and transfer your funds effectively, hassle-free. With a set of comprehensive hedging strategies to provide financial stability, UPFX will aim to get you the best prices in FX.

 

Get in touch with your dedicated currency broker to find everything you need to know about international transfers and the ways UPFX can make your funds prosper in the current currency

Post-Brexit trade deals

International Trade Secretary Liam Fox and South Korean counterpart Yoo Myung-hee signed a free trade agreement (FTA) in order to maintain trade arrangements after Brexit, BBC reported.

This is the first post-Brexit trade deal the UK has agreed with an Asian country and is on similar terms as the ones already established through the existing European free trade agreement the UK currently has with Korea.

South Korea is the fourth largest economy in Asia, producing electronics, steel and auto industry. In just 2018, South Korea exported $6.36bn (£5.0bn) worth of goods to the UK.

With the Brexit deadline set for 31 October, and the UK possibly leaving with or without a deal, the UK realises that it needs to provide continuity in its trading relationship with other countries so that businesses in the UK can be prepared, find the necessary support to maintain growth and productivity.

As Mr Fox said: "The value of trade between the UK and Korea has more than doubled since the EU-Korea agreement was applied in 2011. Providing continuity in our trading relationship will allow businesses in the UK and Korea to keep trading without any additional barriers, which will help us further increase trade in the years ahead. As we face growing global economic headwinds, our strong trading relationship will be crucial in driving economic growth and supporting jobs throughout the UK and Korea."

 

Exporting to South Korea

The secured deal covers South Korean exports such as cars and auto parts. It exports cars and ships to the UK and the UK exports to Korea crude oil, cars and whisky.  The deal will be ratified by the end of October and implemented in November.

According to Andrew Walker, BBC World Service economics correspondent, “Tariff-free trade with South Korea is certainly worth preserving. British goods exports to Seoul climbed sharply after the EU's deal with South Korea was implemented in 2011. Last year the UK sold about £6bn worth of goods there.” South Korea is one of the bigger countries that the UK has enjoyed access through an EU trade deal, with UK goods imports from South Korea exceeding £4bn. The UK is South Korea's second largest trading partner from the EU.

The South Korean international trade secretary, Ms Yoo said: "The deal is significant as it eased uncertainties sparked by Brexit, amid the already challenging environment for exports on the escalating trade row between Washington and Beijing.”

 

Brexit and trade

With the Brexit deadline looming, the UK is trying to seal more agreements with trading partners. If it leaves without a deal, the UK would lose many of the existing trade agreements it currently has as a member of the EU, something that will disrupt 11% of the UK’s total trade.

According to the UK government website, the UK has signed continuity trade agreements with non-EU countries so trade is not disrupted after Brexit. The UK has signed trade agreements with Israel, Iceland and Norway, Switzerland and Chile, among others.

 

UK Importing and Exporting

As the UK government is trying to secure more trade agreements with other countries, Brexit will continue to affect the economy and the political landscape. As an international company importing and exporting goods to and from the EU, you most possibly have been using a foreign exchange company to transfer your funds internationally. Universal Partners FX can help you save time and money on imports and exports, especially when you have to do frequent international payments.

 

Get in touch with Universal Partners FX to access the best exchange rates available and over 140 currency pairs. Your foreign exchange specialist will monitor the markets for you and tailor the ideal solution for your business.  

Moving to France

Buying a property in France can be a massive commitment, especially in times of Brexit uncertainty. However, if you make the right decision, the rewards will be plenty for you and your family. This is what you need to know about the property market.

A robust property market

Unlike other countries that have been hit by the global economic crisis, France has managed to retain a healthy property market, attracting international investors, with a stable year-on-year price growth.

According to online news outlet for expats, Expatica, “in the last quarter of 2017, prices increased by 3.3% year-on-year, with older apartments (4.5%) leading the charge. The biggest increases came in Paris, where second-hand properties increased in price by 5.1% in the last quarter of 2017 and 8.6% year-on-year. So far in 2018, prices have remained robust, though transaction levels actually fell slightly, with 42% of banks reporting a drop in loan applications in February 2018. France’s property market upturn since 2015 has largely been fuelled by low mortgage rates, which in February 2017 remained very low – at just 1.61% in February 2018.”

With inflation beginning to increase at a stable level in 2018 and a weak euro, foreign buyers “can get a more attractive exchange rate for their property investments and essentially pay less for a property than compared to recent years.”

Rent first, buy later

No matter where you are considering to buy, it is always beneficial to gain a better understanding of the place and what it can offer you, all year around, by renting the property first. This will help you experience the different times of year and get a clearer idea of the possible disadvantages of the property and its surroundings.

How to search for property

When you approach a realtor, or agent immobilier, you need to make sure that the company is registered and has financial guarantee, liability insurance and license by the prefecture de police. To help protect your interests, the French government has created the Conseil National de la Transaction et de la Gestion Immobilières (CNTGI) in 2014, to maintain ethical practices and regulations for real estate agents. Once you found the right realtor for you, you will sign a bon de visite, which will demonstrate that you have viewed specific properties.

Location, location, location

France has 21 regions, so you will see variations in prices and different properties. Property prices are usually determined by location.

Paris and other big cities are more expensive, as they offer more employment opportunities and a more cosmopolitan lifestyle with a variety of entertainment and cultural events to choose from. Less expensive are properties in the city suburbs and small towns, but beware, wine growing regions, naturally, are pricey. So the price will increase with such luxuries as swimming pools, vineyards and romantic barns. If you are dreaming of that scenic stone house in the countryside, with vines climbing on the walls, then this will be cheaper than a very modern building with all the relative conveniences. According to Expatica, the eastern side of France has seen some important price falls, but possibly prices will start rising again slowly.

Costs to consider

Finally, it would be good to bear in mind, that there are extra costs beyond the property price that you will personally have to settle. As property agents French Connections warn, “Having found your ideal French property at what seems like a very reasonable price, it can come as a bit of a shock to those used to the UK market that the buyer may have to pay the agency fees and is responsible for all the legal fees – this can make your French house up to 20% more expensive than you first thought.”

Once you know what is included in the asking price and other costs you will need to pay, you might be interested in getting a tailored solution for transferring your funds from the UK. Brexit uncertainty and a volatile pound can affect your finances significantly. Universal Partners FX can offer invaluable support and guide you through the process, recommending the most optimal time to transfer and exchange your currency, giving you peace of mind. Get in touch with UPFX now and find out how much you will save through a foreign exchange broker.

Brexit uncertainty

Brexit has weakened Britain’s manufacturing sector as the latest industry health check from data firm Markit showed. New orders and employment declined last month due to Brexit uncertainty and the impact of the US-China trade war. This was the worst performance for Britain’s factory sector since the EU referendum three years ago.

Firms reported that they have slowed their stock-piling, after the latest Brexit extension to the 31 October. While businesses had been stockpiling to meet the original deadline for Brexit at the end of March, order books shrank rapidly. According to economists, Britain’s factories could be heading into a recession now that the possibility of a cliff-edge no-deal Brexit is no longer on the table.

Markit says: “New order inflows deteriorated from both domestic and overseas sources. New export business fell for the second month running and at the quickest pace in over four-and-a- half years. Manufacturers reported lower demand from Asia and Europe. There was also mention of Brexit uncertainty, including clients diverting supply chains away from the UK, leading to lower demand from within the EU.”

This resulted in Markit’s UK manufacturing PMI fall to 49.4, which is the lowest reading since July 2016, when factories were recovering from the Brexit vote. Despite hopeful predictions from the City which forecasted the PMI around 52, unfortunately, the sector contracted in May.

What is the PMI?

The purchasing managers’ index (PMI) is a closely watched survey that shows the health of the manufacturing sector, which was 53.1 points a month earlier. The IHS Markit /CIPS UK Manufacturing PMI is compiled by IHS Markit from results gathered from questionnaires sent to purchasing managers in a panel of around 600 manufacturers.

What were the UK survey’s findings?

The decline was something experienced by both manufacturers in the UK and the Eurozone, who suffered a considerable decline, with the purchasing managers’ index falling from 47.9 in April to 47.7 in May.

The UK survey found that the Brexit delay was followed by a decrease in domestic and overseas orders. Brexit uncertainty caused companies to move supply chains away from the UK, while limited production meant a second month of job losses. Despite the contraction, manufacturers remain positive and believe that a Brexit deal will be in place, with 49% expecting a higher output in a year.

Rob Dobson, a director at IHS Markit, said: “The UK manufacturing sector was buffeted by ongoing Brexit uncertainty again in May. The trend in output weakened and, based on its relationship with official ONS data, is pointing to a renewed downturn of production.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Concern for manufacturers has deepened this month as the sector’s performance shrank in May and tumbled into contraction. With one of the fastest shrinking rates seen in six and a half years and the biggest drop since July 2016, straight after the referendum result, based on this result, there is the likelihood of more bad news to come.”

Manufacturing Organisation Make UK’s Warning

Before the disappointing data from Markit, Make UK, the UK’s leading manufacturing organisation, had already warned that a no-deal Brexit will be damaging to the economy, reporting weak investment.

The manufacturing organisation said that the UK leaving the EU without a deal will be “economic lunacy.” From Boris Johnson, and Andrea Leadsom, to Dominic Raab and Sajid Javid, all these candidates to replace Theresa May as the Tory leader, have agreed to press for a Brexit on 31 October, whether or not there was a deal.

Chief executive of Make UK, Stephen Phipson explained that the manufacturing sector was on a “weakening trend.” He added: “Earlier this year there was clear evidence that industry was on steroids as companies stockpiled. Underneath, however, there is now growing evidence of European companies abandoning UK supply chains, while Asian customers balk at the unknown of what may exist as the UK leaves trade agreements which operate under EU rules.”

If you are a manufacturer or a business that is exporting or importing, then, possibly, Brexit anxiety has affected your finances. Save time and money on imports and exports when using Universal Partners FX. Universal Partners FX is the best option for wholesale and distribution companies making regular payments. Get in touch with your dedicated dealer and take advantage of expert knowledge and strategic financial planning.