Since the result of the EU referendum was announced in the early hours of 24th June and the country discovered that Brexit was to become a reality, it’s been hard to keep up with the multitude of changes that have occurred in the weeks that have followed. But what about the financial impact of Brexit? After the sharp drop in the value of the pound the day after the referendum took place, the economic movements that have occurred since then have largely taken a back seat in the media to the political and personal machinations of the key players in both the Leave and Remain camps.
One area that has felt the financial impact of Brexit already is pensions. The black hole, which final salary pension schemes in the UK will potentially face, has grown by 30% in just one month. The combined deficits of all the schemes eligible to join the ‘pensions lifeboat’, should a company become bankrupt, increased from £294.6 billion in May this year to £384 billion in June, an increase of almost £89 billion.
The rise has come from the impact of Brexit upon the investments by these pension schemes in Government bonds, which have suffered through the uncertainty the result has created. There are currently 5,945 private sector pension schemes eligible for protection from bankruptcy, of which 4,995 are in deficit. The total liabilities stand at £1,747 billion, which is the highest amount since March 2006, when the Pension Protection Fund’s records began.
The mood has also changed elsewhere in the business world. Recent research carried out amongst 132 CFOs of large companies in the UK, including those on the FTSE 350, found that almost three quarters said they were “less optimistic” about the financial prospects of their companies than they were three months earlier. Almost two thirds also said they were expecting a fall in revenues during the next twelve months, and over two thirds said they believed leaving the EU will worsen the long-term business environment for the UK.
Whilst the post-Brexit financial fallout hasn’t looked particularly positive so far, the best plan for the coming weeks and months is to keep a close eye on how matters continue to develop. If you have any concerns over your financial future, speak to a financial adviser to get sound guidance.