THE TRANSATLANTIC MAGAZINE
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The Forecast is Stormy
Jan Allen, asks how Brexit could affect overseas Americans
By Janathan L. Allen, Tax Attorney/Partner – Allen Barron, Inc, & Janathan L. Allen, APC
It is a challenging time for US expats living and working in the UK. The implications of 'hard Brexit' from an economic and trade perspective cannot be overstated. Hard Brexit could easily develop into the worst financial crisis the UK has ever faced. The absence of trade agreements alone will impact everything from basic necessities such as food and medicine to air travel.
What should US expats be considering at this crucial time in history? If you’ve been living and working in the UK to this point you’ve probably already shifted your banking currency from GBP to US Dollars or Euro. If not, now is absolutely the time to establish an international banking relationship providing the opportunity to conduct your affairs in EUR or USD.
Is it time to return to the US? What impact will present trade wars and tariffs involving the US, the EU and China have upon your economic interests? This is obviously a very personal decision based upon individual needs, goals and familial relationships.
For those who are married to a US or UK citizen there may be no immediate risk. If you are married to a spouse with EU citizenship you are maybe facing a move in your near future.
The employment shortages presented by the exodus of EU citizens could provide advancement opportunities due to the anticipated reduction of skilled and knowledgeable workers. Most financial experts forecast a deep recession which will increase the buying power of USD and EUR but will also lead to devaluation of many UK corporate interests.
Hard Brexit will disrupt existing supply chains and substantially increase the cost of conducting business in the EU and other foreign markets for UK entities. If a UK business can’t make product, supply chains are disrupted and the ability to sell into the EU is no longer unfettered. Where are they going to turn to develop new markets to replace lost business? Further, how long will those substantive changes take?
Those with ownership interests in business and corporate holdings which include UK entities should consider relocating those interests to Ireland. The advantages of Ireland’s continuing access to the EU and the long standing relationship between Ireland and the UK should provide a solid base of continuing business in the UK and access to EU markets, while extending the benefits of Ireland’s favorable tax environment.
When contemplating the chaotic impact of a hard Brexit I am reminded of the substantive economic changes which occurred in the USSR after the fall of the Berlin Wall. With the sudden loss of governmental control, oligarchs running big businesses stepped in to fill the void. It was reminiscent of the wild, wild west!
A hard Brexit could create a similar result. Much like the rise of oligarchs in the former Soviet Union, it is not outside the realm of imagination to conceive of similar developments within the UK after a hard Brexit. The UK Government won’t be in control since it is woefully unprepared. There is no plan for a hard Brexit, only a lot of “fake” news being delivered to the UK public.
Until new trade agreements are developed and implemented, new business supply chains established, new markets established, the cost of basic necessities such as food and medicine will increase. While the immediate forecast is stormy it is not a time to bury your head in the sand. It is a time to take action to protect your holdings and preserve options as the Brexit turmoil and political developments continue.
Allen Barron, Inc. & Janathan L. Allen, APC specialize in complex international tax issues. Go to www.allenbarron.com for more information.
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