11 important questions about Brexit

It’s just over a week since the UK voted to leave the European Union, and the country is still facing economic and political uncertainty.

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While the politicians work out who will be in charge (and of what), ordinary Brits have been left wondering what it will all mean for our family finances.

No doubt you’ve got plenty of questions, so we’ve put together this Q&A on the main issues to help you make sense of how Brexit could affect you…

1. What’s the best way to approach my finances?

While uncertainty is the order of the day on the national and international stage, it’s a good idea to get as tight a grip on your family finances as possible.

That means scrutinising spending on bills such as energy, phones, broadband and insurance and tracking down the best deals available.

Likewise with credit cards and banks accounts – are you getting the best value for money, and is your money working as hard for you as possible?

If you’ve got money to spare each month, it’s worth thinking about building an emergency fund in case you run into unforeseen financial strife.

This is a good idea at any time, not just in a situation such as we find ourselves now.

2. Will Brexit affect my job?

Companies based in the UK are mulling over what to do, post-Brexit. Stay put or relocate to the Continent? Impose a recruitment freeze? Carry on as normal?

Each firm will make a decision according to its own situation, but it’s likely the vast majority won’t do anything dramatic until the dust clears and we get a clearer idea of how the economic land lies.

George Osborne, the chancellor, has suggested that the UK rate of corporation tax might fall below 15% (it is currently 20% and already scheduled to fall to 17% by 2020) in a bid to tempt companies to base their operations here.

3. Will workers’ rights and employment law be affected?

Some Remain campaigners say Brexit could harm workers’ rights, including holiday pay, sick pay and maternity pay.

Again, we don’t know what will happen – it all comes down to which EU laws the government decides to keep, and how the new relationship with Europe shapes up.

There are important EU laws in this area. The Working Time Directive, for example, gives workers the right to at least 11 consecutive hours of rest in any 24 hour period – with some exceptions. But leaving the EU doesn’t necessarily mean the government of the day would scrap or weaken existing arrangements.

We’ll have to see who is the next Prime Minister, whether there is a General Election and, if there is, who forms the next government and what plans they have for workers post-Brexit.

4. Will living costs increase?

There are some fears that inflation might rise because the UK imports a lot of food and goods. If the pound is relatively weak, these imports will cost more, triggering upward pressure on prices.

That said, a weak pound makes UK exports cheaper, strengthening the position of firms that sell abroad.

In the immediate wake of the Brexit vote, sterling tumbled in value, but it has since regained some ground. We’ll have to see how things settle before we really know how prices will be affected.

If the UK economy goes into a tailspin – again, we don’t know what will happen, so it’s a big ‘if’ – then the government might increase taxes, either directly (via your pay) or indirectly (via VAT and excise duties).

5. Will Brexit affect my mortgage?

Mortgage rates usually reflect what happens to the Bank of England base rate.

One of the key factors the Bank takes into account when setting the base rate is the value of the pound against other currencies such as the euro and the US dollar.

As noted above, it’s still too soon to be confident about how sterling will perform relative to other currencies.

But if you’re on a fixed mortgage deal (these usually lasts for two to five years), your monthly payment will stay the same, whatever happens, until your deal expires. The flipside of this is that if you’re on a fix and rates generally fall, you’ll miss out on potential savings. Either way carries a degree of risk.

Those on a standard variable rate (SVR) deals are more exposed to interest rate changes, because their payments are subject to change.

If you’re worried about rates going up and having to pay more each month, you could look at switching to a fixed deal (there’d be costs involved in doing that), but remember that lower interest rates could translate to lower monthly payments.

In other words, fixing would give you certainty, but you’d miss out if interest rates fell.

6. Will Brexit affect my savings?

As with mortgage rates, savings rates are affected by interest rates – which could go either way (or stay the same).

And just like mortgage deals, you can get a bit of peace of mind by switching your savings to a fixed deal where the rate of interest you earn on your money is protected.

7. Are my savings safe?

After the crash in 2008, banks have put in greater safeguards to protect people’s savings. The Financial Service Compensation Scheme (FSCS) protects savings of up to £75,000 per person per banking institution, and is likely to continue to do so.

Remember, this guarantee is offered by UK government, not by the EU.

This doesn’t just apply to banks in the EU, either. Foreign banks and building societies operating in the UK are part of the scheme as long as they’re authorised by the Prudential Regulation Authority (PRA).

You can check if your savings are protected here.

8. Will gas and electricity prices be affected?

Again, this comes down largely to the value of the pound. We import a lot of fuel, so currency movements affect our country’s buying power when it comes to energy.

Additional costs or savings as a result may or may not be passed on by the energy suppliers to bill payers – we’ll have to wait and see.

Interestingly, the pro-Brexit camp suggested leaving the EU would allow the government to remove the 5% VAT that is levied on UK domestic energy bills – but whether that will happen remains to be seen.

It’s worth noting that wholesale energy prices have ticked up in recent weeks, independently of the Brexit issue, so if you are on a variable rate energy tariff, it is worth checking out how much you could save by moving to a fixed rate tariff.

Come what may, switching your energy is one of the surest ways to make your money go further. MoneySuperMarket customers save more than £300 a year on average when they switch.

9. Will travel abroad be affected?

Our sister site TravelSupermarket has looked at what Brexit could mean for our holidays – from buying foreign currency and the cost of holidays to your passport and European healthcare – here.

In short, and aside from how many euros you can buy for a pound, the Brexit vote won’t affect your travel plans this year – and probably not until the UK actually leaves the EU.

10. Will the cost of running a car be affected?

As with energy prices, Brexit’s effect on the pound and the market’s reaction to the UK’s decision could make it more expensive to buy oil, which could push up fuel prices at the pump.

Edmund King, AA President, said: “Fuel prices will be the biggest immediate concern of drivers with the weaker pound and the Chancellor's prediction that leaving the EU would lead to fuel duty increases.”

Since the result we’ve seen a slight increase, and some experts are predicting a 5p to 8p per litre increase over the coming weeks, but we’ll have to wait and see whether that comes to pass.

The EU Gender Directive was introduced in 2012 to make sure you wouldn’t pay more for car insurance based on your sex – regardless of claim statistics for men and women. The AA says an exit from Europe could technically reverse the directive, but is unlikely to.

If you’re driving abroad this summer, your insurance and breakdown cover will still be valid. But check your policy to see you’re comfortable that you’ve got the right sort of protection for driving on the Continent.

11. Will Brexit affect my investments?

Stock markets have been volatile in the past week. If there were a long-term decline in the value of equities, this would affect stocks and shares ISAs, unit trusts, pensions and other share-based portfolios.

But even if the market took a hit because of Brexit, it’s what happens to the value of your investment over the long term that matters – especially with a pension. So it’s probably best not to make any radical decisions until the economic picture becomes clearer.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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