This post is written by Jeremy Goh from our sister site, Asia361.com.
Britain has made the decision to exit the European Union. The markets are in turmoil, the political, legislative and financial sectors have been taken by surprise and are reeling at the prospect of what naysaying economists have been preaching becoming a reality. As a humble working man, we are merely grains of sand, swept up by the wave of political machinations. Macro economics bore us, Fiscal debates put us to sleep. Now that Brexit is a reality, what does it matter to me, the HDB dwelling, office rat who just wants to have a nice beer on Wednesdays and Fridays and an annual 2 week holiday?
Here are my Top 10 Brexit effects that I can wrap my head around enough to care about:
Shop until you drop!! Brexit has shaved about 10% off the British pound’s exchange rate against major currencies, and also the Singapore dollar. The bloodletting is not expected to be stemmed until the central banks react. However, there is a pool of funds at the ready and at the central bank’s disposal to stop the hemorrhaging. Meanwhile, the depreciated pound means Shopping Timeeee!! How apt that it is the GSS (Great Singapore Sale) season now.
If you are heading over across the channel, Burberry, Dorothy Perkins should excite the ladies. For myself and other men, I would pick up some VOX or Albion guitar amps, and a turn table amplifier.
If you don’t have any travel plans, get to your computer and visit ASOS, netaporter, BrownsFashion.com, selfridges.com, and TheOutnet.com.
The British love their drink. In 2004, the year that they drank the most alcohol on record EVER, they imbibed 9.5 litres of alcohol per person. That is the equivalent of more than 100 bottles of wine per year. That said, what the isles are most famous for are their Ales, Whiskeys and more recently, wines. So, with the sliding pound, this could translate into cheaper shelf prices, so raise that glass!
Bookings to the UK have seen a spike, some have been brought forward. Google reports more searches related to travel to the UK. Smelling a good deal, with a depreciated British pound, the Shanghai daily reports that mainland Chinese are flocking to their travel agents. “For Chinese tourists, who love nothing more than an excursion abroad to soak up some culture and splash out on luxury goods, the recent fall in the value of sterling represents as much as a 10 percent discount on all spending in the UK.” – quoted from Shanghai Daily.
As Singaporeans we shouldn’t lose out too. Now would be a good time to make that trip. However, there will be some inconveniences in the future. As immigration laws are set to get tighter, there will be longer queues at immigration counters.
Budget airlines like Ryan Air and Easy Jet might also suffer from a closing up of air space. Meaning that onward travel to other European countries would become more expensive. For now, no major changes have kicked in, so quickly go go go…
Invest in UK or any market. The politicians are confident, the British pride themselves on getting on with things and moving forward from there. With the markets in an irrational, knee-jerk panic. Now is the time to invest. When Brexit was announced, major markets tumbled as equity markets opened for the day. A week later, most have recovered enough for profit taking. My best buy was banking stocks UOB. A simple 3 day trade yielded enough for a very good gourmet dinner within the settlement period. At least in the vert short term, the price dips are due to uncertainty and jitters associated with this unprecedented referendum.
For those with a bigger risk appetite, stocks with a larger exposure to the UK market include Comfort Delgro, City Developments Limited, Ascott Residence, CapitaLand Limited, GL Ltd. Do keep in mind that greater risk, may come with greater reward but also a greater downside.
Properties might also be an apt investment now. Aside from a relatively cheaper pound, there might be some firesales, as those who do not qualify to stay in the UK might be forced to do a firesale. Expatriates and investors might, likewise, leave because of an expected slowdown of the economy and isolationist laws.
Volatility in global markets is a positive effect of Brexit rather than a negative one. Time to earn a quick buck on equity markets. With greater volatility, it is easier for day traders to turn a profit on price differences without any upfront payment.
Affected education. Until school fees adjusts to the inflation that Brexit will ultimately wrought upon the UK, school fees will be relatively more affordable.
However, the quality could be compromised as it gets more difficult to cross immigration policies to pull the best teaching talent and academia.
The student’s leisure experience would surely be compromised as well, as the cross channel liquor run will no longer be the same. Under the EU, there was no limit on bringing alcohol onto the island. Now as a separate entity, it is almost certain that the usual duty free limits will prevail. For alcohol, that means one litre of spirits, four litres of wine and 16 litres of beer. The tobacco limit will be 200 cigarettes. In addition, a limit of “other goods” of £390 will be imposed.
Since Brexit was won primarily on immigration issues, it may be time to rethink migration to England, or make contingencies if already there. As it stands, there have been an increased incidence of “nationalistic” outbursts from the public, aimed against those seen as not traditionally British. This would include those not ethnically of celtic stock but have been in the UK for generations.
A visa for Northern Ireland and Scotland might be in the cards. Scotland First Minister Nicola Sturgeon has already said that she wants to see a second referendum on Scottish independence. A similar process could lead to the reunification of Northern Ireland with the nation of Ireland which, is an existing EU member.
Football fans will be rankled! As part of tighter immigration policies, the major clubs’ players might have to send some of their star players packing back to whence they came. Free movement of players across the continent will be limited by tightening work permit regulations in the UK. Players such as Dimitri Payet, N’Golo Kante and Anthony Martial – none of whom were established internationals when they joined the Premier League – face an uncertain future or, at least, a great deal of difficulty securing a work permit.
On the flipside, countries of the commonwealth might have a stronger standing as part of an economic bloc. As a matter of survival, the UK still has to look towards globalisation and links with the outside world. The easiest would be to strengthen the trading relationships with countries of the commonwealth, and perhaps through these countries access the EU on favourable terms.