A look at how your finances might be affected if we vote to leave the European Union.
The big day has finally arrived. Today, we vote to decide whether Britain stays in the European Union.
But what would be the financial impact of a Brexit? The truth, of course, is that no-one knows for sure.
Despite vociferous campaigning by ‘Vote Leave’ and ‘Vote Remain’, the potential fall-out remains uncertain.
Both sides have wheeled out shock statistics, although many claims are based on conflicting data, varying opinions and a large slice of conjecture.
Here, we round up what the various experts think will happen to your finances if we Brexit.
Currency
It’s not the sexiest starting point, but what happens to the value of the British pound will dictate whether we are better – or worse – off if we leave the EU.
According to many economists it will be the latter. The Bank of England’s latest report suggests the currency would fall on the back of factors such as worsening trade terms.
“It appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply,” it read.
This may have a knock-on effect.
“Households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise,” it added.
Goldman Sachs reckons Sterling could depreciate by up to 20%.
That would be painful, according to Darius McDermott, managing director of Chelsea Financial Services.
“A run on the pound would not be pleasant,” he says. “A weaker currency means higher inflation and less money in the consumer’s pocket.”
Your weekly shop
That weaker pound could mean you paying more at the tills.
Treasury analysis suggests a sterling fall of more than 10% would mean the price of imports increasing.
After two years, it claims, this would push up the annual costs of everyday items by more than £220 for a family of four.
John Hannett, leader of the Usdaw shopworkers trade union, believes it will be even higher.
“Our research shows that workers would be at least £580 a year worse off if Britain leaves the EU, due to a hit to sterling and new tariffs imposed on imported goods like food, drink and clothing,” he says.
However, Leave campaigners counter by arguing that EU membership has actually put up prices and hurt our economic growth.
It states that EU law forbids our elected Government from scrapping VAT on key items, from sanitary products to energy bills – with the net result being increased costs.
As Matthew Elliott, Vote Leave’s chief executive, explains: “The EU is costly, bureaucratic and blind to the impact it has had on people’s wages and soaring energy bills.”
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Our pensions
Retirement plans could certainly be affected, according to Tom McPhail, the respected pensions guru at Hargreaves Lansdown.
Firstly, there is the difficult-to-predict market response to the vote, which could impact gilt yields and/or equity prices.
Then there is regulation.
The countless rules emanating from Europe on regulation and suitability would become the sole preserve of our domestic masters, he points out.
“In theory this means a regime more bespoke to the UK economy and domestic pension investor, but I’d be wary of arguing conclusively as to whether this would be a good thing.”
Read: how to Brexit-proof your pension
Going abroad
A weakened currency means the price of accommodation, food and drinks will be higher for those flying off on their holidays, according to a report from ABTA and Deloitte.
“The UK travelling consumer could be faced with increased costs if an exit vote led to a sustained deterioration in the value of sterling, making foreign currency destinations more expensive in sterling,” it read.
Another gloomy Treasury analysis – based on an estimate that the pound will fall by 12% – suggests the cost of a four-person holiday to Europe could rise by £230 if we headed for the EU departure lounge.
Mobile phone roaming charges
Remember when it cost a fortune to make calls abroad?
The EU has recently introduced caps for mobile phone roaming charges – and this is due to be extended to a complete ban on additional roaming fees next summer.
In fact, the European Commission claims it has achieved retail price reductions across calls, texts and data of more than 80% since 2007.
Unless the UK Government acted to ensure it remained, the law applying these rules would be removed, potentially paving the way for price increases.
Savings and investments
Everything you read and hear about the implications is guesswork, insists Patrick Connolly, a certified financial planner with financial advisers Chase de Vere.
“No-one really knows what will happen if the UK votes to leave the EU but markets don’t like uncertainty and tend to overreact,” he says.
“Generally they correct over time and long-term investments in equity markets should outperform deposit-based investments.”
The stock markets are already in a state of flux over the uncertainty, points out Chris Beauchamp, senior market analyst at IG, the online trader.
“The frenzy of buying that has been seen across global markets over the past few hours matches the panic selling we witnessed last week,” he says.
“Investors have rushed back to buy up stocks, currencies and commodities in a similar fashion to the way in which they abandoned them a few days ago.”
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Mortgages
This is a tricky one. Chancellor George Osborne has warned that interest rates could rise if we leave the EU – with the obvious impact on the cost of borrowing.
His stance is backed up by a Treasury report, entitled ‘The immediate economic impact of leaving the EU’.
It read: “Even while assuming no change to monetary policy, the uncertainty shock would lead to tighter financial conditions, a reduction in real economy lending and higher mortgage rates.”
It has also been suggested that a Brexit could push up the perceived riskiness of lending to people, making it more difficult and expensive to get a mortgage.
However, the Council of Mortgage Lenders doesn’t believe it’s quite so clear cut.
“There is no simple answer to the question of how a decision to leave the EU might affect housing and mortgage markets,” it says.
House prices
A potential problem in the mortgage markets could of course impact house prices.
As few things seem to worry us more than what our homes are worth, Treasury predictions that values could take an 18% hit are scary.
It bases its assumptions on demand being reduced by the possible higher cost of lending – triggered by the immediate shock to the economy of leaving the EU.
Kate Faulkner, founder of consultancy Designs on Property, believes a Brexit will have an impact, although she doesn’t believe it will be extreme.
“Anything taking focus away from a recovery could hold back property prices,” she admits. “It could also hold back investment in building more homes.”
However, she has bad news for anyone hoping that leaving the EU will lead to less legislation in either building or letting homes.
“This Government is keen to regulate the market in England with individual rules such as requiring smoke alarms and, in some cases, carbon monoxide alarms,” she claims.
Living overseas
An estimated two million expats live in other EU countries.
Currently, their pension and healthcare rights are protected under reciprocal arrangements, but leaving the EU would mean a period of uncertainty for them at the very least.
What would happen to their pensions and any annual increases? What about entitlement to healthcare?
How much harder would it become to buy a property in such countries?
A big question mark hangs over all these areas.
Consumer rights
They may be the butt of jokes, but the fact is that a lot of what we can expect from the products and services we buy is enshrined in EU legislation.
The Consumer Rights Directive, implemented in the UK through the Consumer Rights Act 2015, is a prime example.
This piece of policy is responsible for rules such as the 14 day consumer right of withdrawal for many purchases of goods and services.
Will we have the same level of protection if we leave the EU? It all depends on what our policymakers feel is important.
However, Vote Leave point out that consumer protection laws existed before the EU and insist all the red tape means more expensive goods and services.
Petrol prices
Since mid May, the UK’s average price of petrol has gone up another 2.4p to 111.58p a litre while diesel now averages 111.80p a litre, up 2.7p, according to the AA.
This has added £4.80 to the monthly fuel bill of a family with two petrol cars and £2.16 to the cost of refuelling a Transit-size van.
So what will happen if we leave the EU?
Well, once again, it all comes down to the possible depreciation of sterling, although the RAC isn’t expecting anything too dramatic.
It points out that a 20% fall in the value of the pound would add around £2 to the cost of filling up an average 55-litre petrol car.
More referendum articles on loveMONEY:
Brexit 'could hit house prices'