UK due to leave the European Union on 1st January 2021
December 2020
By Georgia Boddy
As we approach the end of an unanticipated challenging and uncertain year, we are also nearing the beginning of a new one which will see the United Kingdom exit the European Union, and with a deal still not in place, concerns are rising that we are entering yet another year of unpredictability.
The FTSE-100 index has fallen 14.3% over the year which marks its worst performance since 2008 when it fell to 31.3%. The main elements working against the FTSE-100 in 2020 are incontestably the pandemic alongside Brexit however Russ Mould, investment director at AJ Bell has voiced reassuringly that these concerns will “start to fade into the background, giving corporate profits, dividends and employment a chance to bounce back”.
The impact of Brexit on the stock market has been exemplified by the global pandemic, and while such activity can be alarming, it has only but proven that in this climate it is essential to diversify your cash savings in order to avoid falling prey to the worst short-term volatility of stock markets as the pandemic and Brexit combined is likely to continue to impact the economy with low savings rates for some time, even if a deal is agreed.
While the UK leaving the EU will not impact FSCS protection on money deposited into UK-based banks and building societies, it is important to note that funds deposited into banks that previously operated in the UK from the EU will no longer be automatically FSCS protected as of 1st January 2021, and therefore it is crucial for savers locking into fixed rate bonds to check whether the bank they are considering will be protected under the FSCS post Brexit.
For British people living in the EU there will be major changes to their banking services as many UK banks and building societies are no longer offering their services to those based in the European Economic Area. To name a few, Nationwide Building Society, Barclays and Lloyds are among the providers pulling products to expats living in the EU and when we finally get to go on the summer holidays we all dream of – you may also be charged more for using debit or credit cards when you buy from companies in the EU.
Bringing the focus wider to the economy in general, the impact on property prices is uncertain but in the short term most commentators are suggesting the pandemic is likely to be a bigger determinant as house prices are being driven by the pandemic-prompted stamp duty holiday until March 2021 on the first £500,000 of a home’s purchase price in England, which has seen a 7.6% rise in the housing market over the past year despite the Brexit transition period nearing to the end.
After the talks have concluded, the EU and the UK will be expected to collectively consider how they might want to continue to cooperate with one another on major international issues and many will be looking optimistically towards the future as the UK leaves the single market and establishes independent trade agreements of its own to hopefully boost the economy following a damaging year to the market.