How will the EU referendum impact business?

With the EU Referendum approaching we thought we would collect a few news stories and insights on the potential outcome and effects on you buying a property in an EU member country, specifically France. We will publish regular updates here in our "News in General" Blog pages on the Cle France website to keep you up to speed.

A Recent Survey by FC Exchange

With the EU referendum now set for 23rd June 2016, many politicians have now revealed how they will be campaigning and voting. We recently heard from the current mayor of London, Boris Johnson, earlier this week and also from the next conservative candidate, Zac Goldsmith, who will both be campaigning for the ‘leave’ camp.

The key government response to this is to put forward the voice of big business, with an open letter from FTSE100 Chief Executives and Chairmen circulated this week, stating the case for staying within the EU.

A recent Institute of Directors (IoD) survey found that only 31% of its members plan to vote ‘leave’, while 60% plan to vote ‘remain’.

Much has been made of the draft deal that David Cameron has secured to change the terms of UK membership to the EU. Mr Cameron will continue to claim these are significant concessions and leave the UK in charge of its destiny, while the ‘leave’ opponents claim it is a “watered down deal” that doesn’t go far enough.

In February 2016, FC Exchange conducted a survey to capture what its business clients thought about the upcoming referendum and whether they thought the UK leaving the EU would impact their business. With interesting and mixed thoughts and results, the survey allows for insightful analysis into how businesses feel in this time of uncertainty.

One of the first questions FC Exchange asked its business clients was whether they thought David Cameron would obtain a meaningful deal from Europe. Results showed skepticism, with only 37% thinking that he would and 60% not expecting anything meaningful.

Would the reforms be classed as meaningful? Likely not, based on a general consensus and softening from the original claims made by Cameron. The ‘leave’ camp certainly do not think enough has been done and this is likely to form a significant part of their campaign.

Do you think that the UK will vote to leave the EU?

55% said "No"

42% said "Yes"

3% had "no Opinion"

The somewhat surprising result of the next question was that - despite the majority not expecting a meaningful deal discovered in the last question - a clear majority of 55% expect the UK to ‘remain’ in the EU. Only 42% said they thought the UK would leave, suggesting that the result of the renegotiation of the UK’s membership was not as important as David Cameron was making out.

The big question the survey then went on to ask was about the expected impact that leaving the EU would have on their individual businesses. Given that a majority of business leaders have come down in favour of the ‘stay’ campaign, citing concerns over the impact on business and certainty of leaving, FC Exchange expected to see a definite effect on the amount of trade done in Europe. Surprisingly, 60% of businesses surveyed thought that UK leaving the EU would have no impact on the amount of trade that their business does with Europe.

Beyond this, the split between companies that expected to see an increase in trade and companies that expected to see a decrease in trade was finely balanced, being 15% against 13%. Only 11% of FC Exchange business clients surveyed were not trading with Europe at the time of the survey, so whatever the impact (which is clearly very uncertain), it will affect most of FC Exchange’s clients and a large proportion of UK companies that trade some of the £515bn with Europe annually.

Where FC Exchange did find a bigger impact of client concern was in regards to their profitability, if the UK were to leave the EU. Results showed that 30% expected a negative impact on their profitability of up to 25%. Only 10% of clients saw the potential of an increase in profitability if the UK were to leave, suggesting the participants feel similar to those surveyed by the Institute of Directors; that there are definite concerns within businesses around leaving the EU.

Lastly, participants were asked what they thought would happen to sterling if the UK were to leave the EU, with a fairly even split between a depreciation of 5% or more, no change, and an appreciation of 5% or more. What it does demonstrate is that no one is confident about where sterling will go.

What do you think the impact would be on sterling if the UK was to leave the EU?

30% said up to 5% loss

12% said "no change"

33% said up to 5% gain

25% said "Don't Know"

The closest approximation we have is the Scottish referendum 18 months ago, which saw sterling drop 6.6% against the dollar within the three months before the referendum, before gaining 2.9% as we saw Scotland remain part of the UK. We could see similar volatility in the next few months, as the campaigns get into full flow and as the polls swing between in and out.

If your business is involved with cross-border activities, then it is advisable to get in touch with a reputable currency broker to discuss your currency requirements surrounding these uncertain times. FC Exchange has transacted over £5billion and helped businesses of all sizes to mitigate currency risk and protect their profits.

Contact us today

Ben Amrany from FC Exchange follow this link or phone and ask for myself and quote "Cle France" on 020 7989 0000.

You may contact me directly using this form (click here) with your requirement and I will explain the options that are available to you in getting the best exchange rate.

Cle France Thoughts

At the moment nothing has changed of course and if the people of the UK vote to stay in then very little will change for at least a generation or two, even if Britain did leave Europe it wouldn’t stop Brits buying and living on mainland Europe. Sharon and David at Cle France lived and worked in France during the 1980's and 1990's when you had to 'jump through many hoops' before it was the 'free movement' we enjoy at the moment, they also lived in France from 1999 up to 2012 full time and at the start of that period you could not just 'arrive' you had to prove income and that you could 'support yourself financially' so going back to that type of scenario won't happen overnight, all it will really mean is a bit more paperwork!

Brits have always bought property as holiday homes and lived full time in France, Spain and other European countries before the formation of the EU and even if there is a Brexit for the UK this will still be the case.

One thing is clear and that is during these times, similar to the Scottish Yes / No campaign there is an air of uncertainty and this will no doubt be fuelled by any further comments from the Brexit brigade, this effect could seriously cause the cost of your property purchase to increase significantly, so for this reason many clients have purchased their euros in advance.

This method is called a 'Forward contract' and by doing this with FC Exchange it means you can fix your exchange rate for up to two years in advance, so you’ll know exactly how much you’ll get when you make your international money transfer. This makes budgeting a great deal easier and a lot of stress is removed.

Do you want more information ?

So if you need to buy or sell sterling and would like to be kept up to date with all the latest data releases and exchange rate movements then feel free to contact myself Ben Amrany. If you are buying or selling a house in France we will make sure your monies are in the right place at the right time, we work hand in hand with you and Cle France.

For more information on the currency service I can provide please feel free to contact myself...

Ben Amrany from FC Exchange follow this link or phone and ask for myself and quote "Cle France" on 020 7989 0000.

You may contact me directly using this form (click here) with your requirement and I will explain the options that are available to you in getting the best exchange rate.