Let’s face it – a no-deal Brexit is a real possibility. But what does no deal actually mean, and how does it affect your finances? Here’s the lowdown.
What is a no-deal Brexit?
Right now, the UK is in what’s called the transition period. We’ve technically left the European Union (EU), but we’re still sorting out what our future trading relationship will look like.
So, what’s a no-deal Brexit, then? It’s simple. In short, it’s the outcome we should expect if the UK can’t agree a trade deal with the EU.
The slightly more technical version?
A no-deal Brexit means leaving the EU single market and customs union without having any alternative arrangements in place. We’d simply trade with the EU on World Trade Organization (WTO) terms like many other countries around the world.
But before we look at the consequences of a no-deal Brexit, how likely is it that we’ll “crash out” of the EU this way?
Honestly? It’s fairly likely. Here’s why.
How are Brexit negotiations going?
The UK is on its eighth round of trade talks with the EU. In all this time, little real progress has been made. Why? Well, there are lots of reasons, but the main sticking point is competition.
Put simply, the EU fears the UK won’t promote a level playing field between UK and EU companies. It wants the UK to adopt competition policies that are virtually identical to EU laws. Unsurprisingly, the UK doesn’t want to do this.
And so, we’re stuck in seemingly endless negotiations that aren’t going very far.
The bottom line? If we don’t finalise a trade deal by 15 October, we’ll probably leave the EU without an agreement.
So what does no deal mean for me?
A no-deal Brexit has far-reaching implications for everyone. Here’s how a no-deal Brexit could affect your day-to-day finances.
We import 30% of our food from the EU, including fruit, drinks and vegetables. Without a Brexit deal, we’ll probably see a rise in prices for certain items, and there could be shortages. If you can, it might be an idea to buy in frozen fruit and veg – it’s cheaper and lasts longer.
It’s likely that electricity and gas prices will increase for some consumers because we’ll lose access to EU energy markets.
However, our supply chains with countries like Norway, from whom we import 45% of our gas, are unaffected. So, there’s some doubt over how much of a price increase we’ll actually see.
Travel will probably be more expensive.
- If you have a pre-existing medical condition, you’ll need travel insurance because the European Health Insurance Card (EHIC) won’t cover you anymore.
- It could cost more to pay for items abroad using your UK bank account.
- If you’re driving abroad, you’ll need a GB sticker, sufficient insurance and, in some cases, an International Driving Permit. These costs all add up.
- A weak pound will also affect the cost of your holiday, but the impact of this is hard predict at this stage.
- Mobile roaming charges could increase, but there’s no sign from operators that they plan on raising prices.
Right now, we don’t pay extra charges to import EU goods. However, if we’re importing on WTO terms, we’ll pay the same charges as consumers elsewhere. So when you buy goods from the EU, you’ll need to budget for taxes and custom duty.
On the same note, it could cost more to sell goods to EU customers, too.
Have a credit card? You could see a spike in credit card charges. Why? Because right now, there’s legislation in place to protect you from retailers adding credit card surcharges to purchases. If there’s no deal, this legislation falls away and retailers can impose surcharges again.
Got a savings account? It’s unclear what impact a no-deal Brexit will have on savings rates. For now, just focus on saving as much money as possible.
While there’s still time for the EU and UK to strike a deal, a no-deal Brexit is on the cards. There’s a great deal of uncertainty over what this will mean for personal finances, but at least in the short term, brace yourself for increased living costs.
Protect yourself now by switching to a 0% credit card and cut back on unnecessary spending.
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