The impact of Brexit on personal finances in the UK

Category: United Kingdom

With the UK now officially out of the EU, it’s worth spending some time looking at the impact of Brexit on personal finances.

Much of the fevered speculation during 2020 centred around the potential impact of the UK leaving the EU on a ‘no-deal’ basis. Happily, the new trade deal makes a lot of that speculation redundant. However, there is still a lot of uncertainty around sectors. For example, the deal doesn’t cover financial services.

Read on for some of the key factors that may have an impact on your finances, and how Brexit could have a bearing on these in the coming months.

The impact of Covid-19

When it comes to assessing the impact of Brexit on personal finances, the big (hopefully masked) elephant in the room is the Covid-19 virus. It overshadows everything and makes any accurate assessment or predictions exceedingly difficult.

The UK is currently in a third nationwide lockdown. Although the government have not confirmed any timescale in terms of how long it could last, there are suggestions that it could be at least the middle of March before we start seeing them lift some of the current restrictions.

Restrictions on travel and businesses’ ability to function normally are continuing to have a negative impact on the health of the UK economy, and this is likely to continue well into 2021.

Interest rates remain low

We can get some idea of the financial impact of Brexit by looking at some of the key financial indicators, and how they can impact on your personal finances.

The Bank of England reduced the UK base rate to 0.25% in the immediate aftermath of the Brexit vote in 2016. They then reduced the rate again to an historic low of 0.1% in March 2020 to help counter the economic shock of the coronavirus. This rate reduction was mirrored in Australia where the Reserve Bank made a similar cut in October.

With the long-term impact of both the pandemic and Brexit still uncertain, it’s unlikely policymakers will look to increase the rate in the foreseeable future, so mortgage rates should remain low.

Countering the positive news is the fact that interest rates on savings will also remain low, making savings accounts good for emergency funds, but little more than that.

The post-Brexit withdrawal of some EU-based financial companies from the UK market could accentuate the issue of low interest rates on savings by reducing competition, even if Base Rates do increase.

House prices could fall in 2021

In November 2018, the Bank of England speculated that a Brexit worst-case scenario could see property prices fall by as much as 30%, but happily the trade deal and orderly departure makes this extremely unlikely.

Other factors seem to be having an impact on property prices rather than Brexit.

The Stamp Duty holiday on properties under £500,000 introduced in July 2020 was the key driver for UK house prices increasing by 7.5% in 2020 – the highest increase for six years.

However, the Office of Budget Responsibility (OBR) are predicting property values to go down this year with the UK’s biggest mortgage lender, the Halifax, suggesting a fall of between 2% and 5%. This would appear to have more to do with the end of the Stamp Duty holiday in March, and the continued uncertainty over jobs and wages caused by the pandemic than anything to do with Brexit.

Exchange rates

The value of sterling fell in the immediate aftermath of the UK vote to leave the EU in June 2016. Since then, it has failed to regain the ground it lost in terms of value against other major currencies worldwide.

This means that you will get a decent exchange rate if you are moving assets from Australia to the UK but, conversely, a lower rate if you are buying Australian dollars.

The current weakness of sterling means that, as of 7 January 2021, 100 Australian dollars will buy £57. This is an increase of 16% from the low of £49 in May 2020.

Stock markets 

Stock markets around the world fell dramatically in the immediate aftermath of the coronavirus outbreak in March 2020.

However, most have recovered the value they lost at that time and, as you can see from the table below, are now at a higher point than they were before the outbreak.

Index 7 January 2020 7 January 2021 % change
Dow Jones (US) 28,735 31,041 +8.0%
Nasdaq (US tech) 9,129 13,065 +43.1%
Nikkei 225 (Japan) 23,739 28,139 +18.1%
DAX (Germany) 13,320 14,076 +5.6%
FTSE 100 (UK) 7,574 6,851 -9.5%

Source –

The one notable exception to this trend has been the FTSE, which is still some way below its position at the start of last year. The consensus is that this is a result of the economic uncertainty around Brexit. Indeed, the confirmation of a trade deal with the EU saw the FTSE 100 rise 6% in the first week of this year, so it is hoped that it will continue to recover lost ground.

Investment funds had a roller coaster journey in 2020. The key lessons learned were to hold stock in the event of a sudden market fall of the type we saw, and to maintain a diversified portfolio.

Other issues

Alongside the tangible details of economic indicators, there are other less measurable factors that could impact on personal finances because of Brexit.

For example, Brexit could result in holidays in Europe being more expensive in the future, as European agreements on reciprocal health care, telephone roaming charges, and motor insurance no longer cover the UK.


One thing we can say with some certainty is that, in terms of the overall health of the UK economy, the trade deal with the EU is a positive outcome, which was reflected in the rise in the FTSE 100 in the aftermath of the signing of the deal.

However, we really will not know the full impact of Brexit on personal finances for some time – certainly not until the impact of the Covid-19 pandemic starts to decline.

Get in touch

Get in touch with us if you have any concerns around how Brexit could impact your personal finance issues such as your investments or pension arrangements.