Family finance, Saving money

Preparing for a hard Brexit: What are the potential implications for your household?

All over the news at the moment is Brexit, and the potential effect it will have on the economy, immigration, and the country as a whole. What’s harder to figure out though, is what that actually means for the average family household.

Regardless of whether you’re a Leaver or a Remainer, if recent reports are to be believed, there’s a reasonable chance we could be heading for a hard Brexit come March 2019.

This post is to explore a few things you might want to be aware of, that have possible implications for you and your family. It also includes some money saving household tips, that will hopefully help with any potential financial changes as a result of Brexit.

sign for UK opposite driection sign for EU

Imports and the Exchange Rate

From cucumbers to computers, 17% of the money we spend is on imported goods. So whilst import prices and tariffs might seem far removed from us personally, they actually directly impact on not only our bigger purchases, but also our everyday buys.

The most immediate effect of the Brexit referendum, is the impact on the exchange rate. There was a depreciation in value of the pound by 13% between Jan 2016 – March 2017. It is uncertain whether Sterling is likely to depreciate further following Brexit, but as imported goods are purchased in the foreign currency, the exchange rate does directly impact of the cost of imported goods. Therefore, the lower the value of Sterling in the exchange rate, the more Sterling is needed to purchase the same amount of foreign currency which consequently means an increase in the cost of purchasing imports.

Food Prices

A not insignificant 30% of the food we buy is imported, with 70% of that currently imported from the EU. This means that changes in tariffs and exchange rates for imports are likely to affect food prices for households in general.

To get an idea of how depreciation of Sterling can affect the price that ordinary consumers like ourselves pay for food, we can look at previous history. In 2007 -2008, there was a 21% depreciation. In this same period, the price of food increased by 8.7%. Although it is too soon to gauge whether the more recent depreciation will have a similar correlation with an increase in food prices, there is already some evidence to suggest that it might.

Changes to the exchange rate along with the as yet undecided changes in tariffs, will directly affect how much it costs for imported goods to reach our supermarkets. This in turn will affect the prices we pay as consumers.

According to the IFS, as lower-income households allocate a higher proportion of their income to food (23% compared to the 10% spent by higher income households) they are more likely to be impacted by changes in the levels of food prices.

groceriesPhoto by Alexandr Podvalny on Unsplash

What about domestically produced food?

Although at first thought you might not expect a change to the prices of products produced domestically, these are also likely to undergo changes. UK based companies might also use imported products or services, and the increased cost to them is likely to be reflected in the prices they pass on to us.

Additionally, as UK firms compete with other firms in price, the changes in pricing of imported food may lead to an opportunity for domestic firms to also increase their prices.

In summary, although it can’t currently be fully predicted, and is likely to vary across products – for example agricultural and non-agricultural products are subject to different tariffs – we are more than likely to see the impact of Brexit in the prices displayed on our supermarket shelves.

So that 50p cucumber (which actually may have started its journey to your kitchen in The Netherlands!) could end up costing a bit more. And while spending a few more pennies on a cucumber might not sound like much, pricing increases across your whole trolley could potentially end up causing a significant change to the cost of your weekly shop.

How you can make savings on your food bill

To be prepared for any price increases, or simply to start saving money on groceries there are a few things you could do.

  • Try meal planning

Organising the meals you’re going to have in advance is a great way to save both money and time. It means that you’re more likely to stick to buying the things you need, and should mean you end up with less food waste.

  • Use supermarket cashback and receipt apps

There are a few apps you can use which will give you cashback when you buy certain items in the supermarket. This is a good way to get a few freebies and to get a few pennies back of the cost of your shop. Receipt apps will pay you a few pence to upload pictures of your shopping receipts which they use for consumer research purposes, it doesn’t pay much, but it only takes a few seconds to do and it all adds up.

  • Make a budget

This wont just help with your food shop but all areas of household spending. Creating a budget is a great way to help manage your finances, and allows you to identify areas where you could potentially make savings.

Other Products

Although food makes up for biggest proportion of what average households spend on imported goods, 17% of our overall spending is imported. This means that it’s likely that in the case of a hard Brexit we could also see price increases in other areas too.

Goods entering the EU are subject to stringent checks and controls. As part of the EU Customs Union and single market, products produced in the EU and imported into the UK are not currently subject to these checks. Leaving the EU without a deal would mean that likely would change (assuming we impose our own checks). This increase in administration would potentially be responsible for any price increase we might see in the shops.

Taking clothes and textiles as an example, analysis from the BRC (British Retail Consortium) suggests that category of goods could see an up to 7% increase in price. Rachel Lund, Head of Analytics and Insight at the BRC said:  “Although it’s unlikely that there would be a complete pass through onto consumers, cost increases of this magnitude would inevitably lead to higher prices for consumers.”

woman browsing clothesPhoto by Becca McHaffie on Unsplash

Tips for saving money when shopping

  • Always shop around and compare prices to make sure you’re getting the best deal
  • Check for voucher codes and discount codes before making any purchases
  • Always check if there is cashback offered for the retailer you’re shopping with.

Cashback sites include hundreds of retailers and will often offer either a percentage or a set amount of cashback when you click through from their site to shop. The two biggest sites are Quidco and Topcashback.

Holidays and Travel

Despite the amazing summer we seem to be having this year, standard British weather usually has us all chasing the sunshine and visiting places with less rain. But what are the implications of Brexit on our holiday and travel plans from 2021?

To start with, coming out of the EU means that we’ll no longer have the Free Movement we currently have, and plans from the Council of the European Union mean we would be subject to a €7 travel authorisation fee. That’s per adult and it would last for 3 years.

Another thing which could affect us on holiday is the potential for the reintroduction of Mobile Roaming charges, however this will be down to the individual providers.

Other factors affecting holiday prices are the fall of the pound and the exchange rate. Holidays this year have been more expensive than last year, because of the decline in value of the pound. However, it’s not known how the pound will fare after Brexit.

plane in skyPhoto by Jose Macías on Unsplash

 

Top tips to save money travelling

  • Book early or late

You can often get good prices by booking well in advance, as holiday companies and tour operators will often give early booking discounts. If you are flexible with dates, booking your holiday last minute is a good way to bag a great deal. This is because holiday operators have already reserved accommodation and plane seats, so as it gets nearer the time they become more desperate to sell them on and so reduce the prices.

  • Use comparison websites

Travel agents can sell exactly the same holiday for completely different prices so it’s always worth shopping around to find the best price  for the holiday you want. You can also try haggling to get money knocked off the price.

  • Pay in the local currency

If you’re buying something with your card abroad and asked whether you want to pay in pounds or in the local currency always choose the local currency. This means that your home bank does the conversion for you, rather than the foreign bank, which is likely to incur higher fees.

  • Consider holidaying in the UK

Especially with the weather how it’s been recently, there are plenty of great places to go on holiday right here. Save even more money with these tips on how to give your wallet a break while holidaying in the UK.

These are just some of the ways that Brexit could impact British households, and of course, nothing is for certain. However, regardless of whether we encounter positive or negative changes, it’s always great to be able to boost our budget by taking simple money saving measures and making sure to get the best deals possible.

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Money Saving Tips to prepare for a hard BrexitPreparing for hard Brexit: implications for households and money saving tips you can use to prepare.

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