Wednesday, August 3rd, 2016
Post-Brexit Banks
Two months post-Brexit we are still yet to see any major changes that will impact all our lives drastically. This doesn’t mean that changes aren’t happening that will affect us in the future. Since we are only at the start of the two-year negotiation period with the European government, we still have to abide by the EU laws until our leave terms have been decided, this includes laws influencing business such as tax. Over the next few years there is sure to be a period of uncertainty on whether there will be growth and prosperity or not.
Arguably the most significant change so far is the cut to interest rates which are now at a record low of 0.25%. This low interest rate seems to provide a safety net for businesses with loans as they will no longer have to pay as much back to the bank as they did before Brexit. Whilst this is a positive for those with loans or those who have managed to secure loans, banks are reluctant to start lending money again until there is more certainty on the country’s financial status. This is shown by the slowdown in borrowing on credit cards and loans compared to previous strong growth. This also doesn’t benefit owners of small businesses who tend to keep a lot of their finances in savings. The money banks put back into savings will now be reduced significantly, which for some business owners may have been what they relied on.
Governor of the Bank of England, Mark Carney, has said that despite the uncertainty in recent months, we have “so far managed to absorb the shock” but this doesn’t mean that it will stay this way. The value of the pound is determined by interest rates, economic growth and a view of the UK’s economic future, all of which are still considered to be negative. For this reason, it is important to plan ahead as best you can to mitigate potential risks.