With the devaluation of the British pound, expats in the United Kingdom will find it extremely difficult to make payments to them in their home countries.
When Katie Sidel, an American residing in the United Kingdom, pays this month the installment of the student loan she obtained while she was studying at university in the United States, she may not have much of the net salary left after she deducts a large sum from it.
Katie Seidel, 29, is one of many expatriates living in London who are cautiously watching the repercussions of Britain’s vote to leave the European Union, and they are already beginning to suffer after the British pound fell 10 percent against the US dollar.
“We are experiencing tremendous change, as most of us (expatriates from America) send money to the United States,” said Katie.
When the British government goes ahead with the implementation of exit measures from the European Union and the suspension of the principle of freedom of movement between the countries of the European Union, the impact of the decision will be more severe for Europeans residing in the United States.
But this does not prevent that Britain’s vote to leave the European Union has dangerous and unexpected consequences for tens of thousands of expatriates from countries outside the European Union who face an unknown future.
Many of them have already started to see a sudden drop in the value of their salaries, because they receive their salaries in the host country currency, that is, the British pound, while they have to pay real estate or other loans in their home in the local currency of their country.
But currencies in the United States, Canada, Australia, and other countries outside the European Union are still maintaining their strength, meaning that in order to pay a monthly premium of $ 1,000, you will pay 750 pounds, after you were only paying 640 pounds a year ago.
But there are other expatriates who are worried about job stability and residence permits, and are confused about not knowing whether or not they will be allowed to work in the UK.
As they may lose their jobs due to the economic deterioration in the UK, and consequently they will also lose the right to stay and work in the country, which is closely related to the job.
Many non-Europeans are involved in the financial and banking sectors in London. Some companies in that sector have already begun planning to move their employees to other countries within Europe, and some have even warned about the possibility of layoffs.
HSBC, for example, has indicated to the BBC that it may transfer 1,000 employees from London to Paris if the UK begins exit procedures from the European Union.
The chief executive of JPMorgan, one of the largest banks in the world, which employs 16,000 people in the UK, including more than 4,000 employees in Bournemouth, warned earlier in June that the bank would not be He has no choice but to cut back his UK staff, and transfer jobs to other places in Europe.
Kate Fitzpatrick, consultant in the field of moving people from one country to another at the Mercer Human Resources Consulting Services in London, said that the exit of Britain dealt a severe blow to expatriates who negotiated contracts to work in Britain in exchange for rewards and benefits, and they worked Their organizations treat them as British employees.
And she continued: “The expats who work in Britain, according to local conditions, and have obligations (financial) abroad may be most affected by the exit of Britain.” Advance planning
Some expats have already started planning to protect their salaries by negotiating with companies in their home country. Among them is Feinberger, who is seriously considering negotiating with a US employer, if sterling continues to drop against the dollar, to obtain a currency-linked bonus, in order to offset the amount earned by the computer-based company, from a 10 percent cut Of his salary, when you pay him in pounds sterling.
“My wife told me, since you are providing money for the company, you might want to ask for a bonus,” said Feinberger.
Although he has not yet experienced financial hardship, he is trying to manage travel expenses outside the UK, which are now more expensive than before after the fall of the British pound.
The couple’s dilemma
Expatriates who have worked in Britain for a long time, without the guarantee of multinationals, are afraid of what might happen next. Seidel, an American and married to a German, said that many expats in the United Kingdom obtained a work visa because their husbands or wives held the citizenship of a member state of the European Union, and did not obtain it under the sponsorship of an employer.
And given the prospect of her husband being stripped of the benefits of the European Union while living in London, Seidel is afraid that she will find herself on her own when it comes to applying for a work visa.
Other expats plan to take immediate measures to protect their money. Among them is John Stirling, a real estate broker, who plans to return to Los Angeles after spending two years in London, but he will continue to undertake real estate brokerage work in both the UK and the US. Stirling said that, by moving to the United States, he would avoid the effects of the instability of the pound sterling, and would maintain his established real estate business while in London.
Stirling, who is seeking to sublease his apartment and move to the United States this summer, added: “I am waiting to see what it will be like. I actually sold all my tangible property here last Thursday.”
Owen Derbyshire, associate professor of organizational behavior at the Saeed School of Business at Oxford University, said expats are now afraid to move to the UK so their jobs are not blown by the wind once they get there, and this will make it harder to hire new employees.
Derbyshire said, if you intend to travel abroad to work, keep in mind: Is it worthwhile going to London this time? Will this position remain for another two or three years?
And he added, “The most important task facing companies is to attract people who accept to work in light of these financial changes.”
Derbyshire expects that, in the event of such instability, highly qualified expatriates will choose to go to work in financial centers near the United Kingdom, such as Dublin and Frankfurt, where employees receive their salaries in currencies other than sterling.
For the time being, UK employers should focus on ensuring that Britons working abroad for their organizations move seamlessly to the UK, if they choose to return home.
Derbyshire said: “However, the problem that captures the most of the employers’ attention is that the timing of the assignment period for these expatriates may prevent them from returning to the United Kingdom. ”
Sterling, the real estate broker, has frozen all appointments in the UK. Instead of hiring a computer programmer from San Francisco to join his team in the United Kingdom, Stirling said, he would search for someone to hire him outside of the UK, with his salary paid in a more stable currency.
He also plans to eventually move two other employees out of the United Kingdom. He continued: “There are European countries other than the United Kingdom where we can start our business.”
Guided by previous cases
Despite the UK’s anxiety and uncertainty, many economists say there is no need to fear now. Fitzpatrick says at Mercer that large multinationals are used to dealing with currency declines, and often have policies to protect their employees.
She added that in the past year, currencies in Brazil, Nigeria and Russia recorded a sharp drop that exceeds the devaluation of sterling in stages. And as long as most companies put plans and measures in anticipation of similar events, for the sake of tax parity, according to which expatriates pay taxes according to the tax system in force in their home country, the increase of allowances and payment of salaries in two currencies.
“But we advise companies to wait and make some adjustments retrospectively,” Fitzpatrick said. “We cannot evaluate what matters will turn out for.”
In the opinion of Fitzpatrick that after the vote, companies in the United Kingdom that employ expatriates may see an increase in the number of employees who prefer to receive their salaries in the currency in their home country.
Of course, this will benefit some, who will reap the benefits of the low sterling that will enable them to invest in the United Kingdom instead of investing in their home country.
Feinberger is now planning to sell his home in the United States, which has increased in value at the present time, and stop paying monthly mortgage payments there, in return for investing in the London real estate market, which is famous for its exorbitant prices, as the depreciation of the British pound is in his favor.
“Overnight, my purchasing power increased,” says Verberger.