Article 50 has been triggered – what now for your finances?


Article 50, which is the beginning of the process for negotiating leaving the European Union, was triggered by the Prime Minister today. What does Article 50 mean for your finances?

What is Article 50?

Article 50 is part of the Lisbon Treaty, which was signed by the EU member countries in 2007 and which is the most recent EU constitution. It took effect from 2009. Article 50 is one part of the treaty, and it sets out that a country that wants to leave the EU must tell the European Council. It doesn’t give much detail about how the country (in this case, the UK) and EU then negotiate the withdrawal. But it does set out a timetable for negotiating the withdrawal of a maximum of two years.

You can read the letter Theresa May wrote to the European Council on the website.

What does Article 50 mean for your finances?

At the moment, it’s impossible to say what it could mean for the economy in the longer term. It really depends on the deal we get with the EU and other countries, how the negotiations go and how businesses (and people) react to the uncertainty.

What we do know is that the government expects there to be an impact on the economy. This was set out in Philip Hammond’s Budget on March 8th. Until the end of this year, the UK will be the fastest growing economy in the EU. It’s expected to grow at 2% a year (this was revised upwards from 1.4% in the Autumn Statement).

But from 2018 – 19, growth is expected to slow – at 1.6%, then 1.7% in 2019 – 20 and 1.9% in 2020 – 21.

What does Article 50 mean for savings?

If the economy doesn’t do as well as predicted before Brexit, that could mean that interest rates stay low. If so, interest rates on savings could remain stubbornly low. However, if inflation rises to levels that the Bank of England feels uncomfortable with, it may raise interest rates, and the rates on savings would be likely to follow.

What could Article 50 mean for investments?

It’s impossible to say what it could mean in the long term – and the wild currency and stock market reactions to the Brexit vote were relatively short lived. But there are likely to be a few more ups and downs, purely because we’re in an uncertain period.

We’ve never left the EU before so we don’t know what’s ahead. Jason Hollands from Tilney says: “The negotiations themselves will be behind closed doors but we can expect periodic leaks and briefings, as well as statements from political leaders and intense scrutiny over many months. There may well be points where talks stall entirely and later reconvene. This filtering out of information will inevitably lead to ongoing skittishness in currency markets, for both Sterling and the Euro, so the road ahead will likely be a bumpy one.”

What does Article 50 mean for pensions and financial regulations?

All EU laws that apply to the UK will be transferred to UK law so, for while we’re still members of the EU, it will be business as usual. Once we’ve left, whichever government is in power will look at which laws it wants to keep and those it wants to ditch or water down.

What does Brexit mean for holidays?

The lower level of the pound does mean that holidays abroad could be be more expensive, depending on where you’re going. That’s because the value of the pound is lower than it was before the Brexit vote in June.

Higher inflation could also mean it’s more expensive to travel in the first place.