25 November 2018

New research shows consumers baffled about how to respond to Brexit uncertainty

2 min read

 
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Becky O'Connor

Personal Finance Specialist

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  • New research shows that investors are confused about how to handle their finances in the face of uncertainty over Brexit; a majority have made no changes to their investment approach; some have chosen to take less risk while others are taking on more risk;
  • Mutual insurer Royal London sets out six ways in which people can “take back control” of their finances and reduce their exposure to uncertainty, regardless of the Brexit outcome
 

New research shows consumers baffled about how to respond to Brexit uncertainty

Ahead of Sunday’s (November 25) crucial summit at which the EU is expected to sign off Theresa May’s Brexit agreement, research for Royal London has found that 32 per cent of people think that their personal finances will get worse as a result of the UK leaving the EU, with only eight per cent expecting their finances will get better.

Nearly four in ten (38 per cent) people think their finances will “be much the same”, with almost a quarter (23 per cent) saying they don’t know, according to the survey by YouGov on behalf of Royal London. [1]

The UK population is at a loss over whether, or how, to prepare their finances for Brexit.

Of those people questioned who have pensions and investments, 67 per cent haven’t changed the risk level of their portfolio at all in the last 12 months in the run up to Brexit; 5 per cent of those with pensions and investments have increased the risk level and 15 per cent have decreased it.

 

Becky O’Connor, personal finance specialist at Royal London, said:

“This research shows that through the eyes of the general public thinking about the pounds and pence in their pockets, the glass looks more half empty than half full.

“When you boil it down, anxiety around the impact of Brexit is partly about how we think it will affect us as individuals financially. ‘Will I lose my job?’ ‘Will the value of my house fall?’ ‘Can I still go to Spain for my summer hols?’ These anxieties can feed into our financial decision-making, rightly or wrongly, or just make us afraid to do anything.

“It’s hard not to worry at all with so much of what lies ahead looking uncertain and uncontrollable, but as it’s almost impossible to predict meaningfully what the impact of Brexit will be at this stage, it’s also hard to direct that worry into action.

“However there may be some sensible steps we can take, depending on personal circumstances, to shield our personal finances from any unwanted side effects.

“The six-point plan we suggest is for those who would like to take simple, practical measures to make their finances Brexit-ready, whatever that eventual Brexit looks like. The points amount to a common sense review of the deals you are on and the products you hold, but with Brexit getting closer, there has never been a better time to do it.”

Trevor Greetham, Head of Multi Asset Investments at Royal London, said:

"The Prime Minister has said we face three choices: her deal for leaving the EU, a destabilising ‘No Deal’ exit or ‘No Brexit at all’. It’s almost impossible to predict the outcome so we suggest hedging your bets, spreading long term savings across a range of investments at home and abroad. Having some money invested in overseas assets could provide a boost to your finances if the pound weakens on the foreign exchanges in the negative Brexit scenarios many people in our survey appear to be concerned about.”

What different groups think about the impact of leaving the EU on their finances

The different responses to the question “When Britain leaves the European Union, do you think your own personal finances will get better or worse, or stay much the same?” tend to mirror where people stand on the remain/leave spectrum.

The majority (54 per cent) of those who voted Leave in the Brexit referendum expect their personal finances to stay the same in the event of the UK leaving the EU, while the majority of Remain voters (58 per cent) expect their personal finances to get worse.

17 per cent of Leave voters believe that Brexit will improve their own financial situation, with 10 per cent saying they expect their finances to get worse, according to the research conducted by YouGov on behalf of Royal London.

Meanwhile 25 per cent of Remain voters expect their personal finances to be “much the same”, with one per cent expecting them to improve after a Brexit.

 

Younger generations less sanguine than the over 50s

Across all age groups, a higher percentage of people believe that their finances will get worse rather than better following Brexit, however younger people expect the outcome for them personally will be worse: 37 per cent of 18 to 24-year olds expect a decline in their financial circumstances against just two per cent who expect an improvement, 34 per cent versus six per cent of 25 to 49-year olds, 32 per cent versus 12 per cent of 50 to 64-year olds and 25 per cent versus 10 per cent of those who are 65 or over.

 

… And Londoners and Scots most likely to expect finances to get worse

Split regionally, 46 per cent of Scots expect a decline in their personal finances, against three per cent who expect an improvement; 36 per cent of Londoners think their personal finances will get worse against five per cent who think they will get better, 29 per cent versus nine per cent of people in the South, 30 per cent versus seven per cent of people in Wales and the Midlands and 31 per cent versus 11 per cent in the North.

 

Men and women both pessimistic, but women slightly more so

Both men and women, regardless of which way they voted, are more pessimistic than optimistic, with 33 per cent of men and 31 per cent of women believing that their personal finances will get worse after Brexit, against 11 per cent of men and five per cent of women thinking that they will get better, with 38 per cent and 37 per cent respectively stating that they think their financial circumstances will be “much the same”.

 

The six-point Brexit plan for your finances

 

B – Balance your saving and spending needs

 

So far, there is no Brexit-related justification to cancel Christmas. But equally, it’s prudent not to blow all your spare cash in these times of uncertainty. The amount most of us should aim to have in emergency savings is three to six months’ worth of current income. If you’ve met this goal, there’s no reason to rein in your spending from what’s normal for you.

 

R – Regularly review outgoings

 

If you normally re-assess your big outgoings once a year, why not bring it forward a bit? You could save money each month by switching to a cheaper mortgage deal if you are already at or coming to the end of an existing deal. Try an automatic energy switching service to ensure you are always on the cheapest energy deal. Check the cheapest petrol and diesel near you on petrol comparison websites to make sure you aren’t overpaying on fuel.

 

E – Explore savings options

 

Not moved your savings lately? While interest rates still aren’t particularly alluring, it’s still going to be better for you to be on a best buy easy access account than the average rate. Check the best buy tables.

 

X – Exchange your currency

 

The Pound has already weakened in response to Brexit and now stands at €1.12.What we don’t know is whether it is likely to fall further or strengthen, depending on the nature of the deal. If you need to buy foreign currency for a future trip or to send money abroad, then you might want to exchange in advance to mitigate volatility, perhaps holding the money in a borderless multi-currency account in the meantime.

 

I – Invest wisely

 

The usual guidance to spread your investments is particularly worth heeding at times of uncertainty. Investors with a low appetite for risk should ensure most of their assets are held in sterling bonds and cash to protect their investments from swings in the exchange rate. If you are a growth-oriented investor you should consider opting for a multi asset approach to help you ride out any ups and downs in the market with money spread across a variety of asset types including bonds and commercial property as well as stocks and shares, both at home and abroad.

 

T – Take action on your worries

 

For anyone about to retire, the big worry will be that stock market volatility will affect the value of their pension pots just at the point they want to draw on them. If this is you, it could be time to contact an adviser (www.unbiased.co.uk is a good place to find a qualified adviser near you) or to seek free guidance on the Money Advice Service.

 

- ENDS -

Notes to editors

All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 1,622 adults. Fieldwork was undertaken between 20th - 21st November 2018.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). YouGov is a member of the British Polling Council and abide by their rules

 

For further information please contact:

Becky O’Connor, Personal Finance Specialist

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.