Canada may enjoy our Commonwealth status and sport the portrait of the Queen on currency, buildings, and the occasional pub mantelpiece, but the recent Brexit vote has certainly cast the transatlantic relationship in a different light. The economic aftershock of Britain’s vote to leave the European Union was felt immediately, though it continues to course-correct in recent days. Analysts’ opinions on the long term effect of Brexit as a global financial event range from apocalyptic to cool headed, so it’s been difficult to find a reasonable consensus. How might this European political shift affect Canadians’ day-to-day financial plans?
The most immediate effect will be on investment portfolios: major indices the world over lost considerable value as global investors saw flashbacks to the financial crisis of 2008. However, the general tendency of markets is to overreact and correct – unless your investment portfolio is heavily stocked with European equities, the average Canadian ought not to fear for their safety. Some advisors have even indicated that Canadians with cash on hand and long-term investment plans could view Brexit as a buying opportunity.
The U.K. is Canada’s third-biggest trade partner after the United States and China, yet it represents only about three per cent of exports. That being said, businesses with direct commercial links to British partners will need to be especially aware of the economic situation in a post-Brexit climate.
Interest rates, already at historic lows in Canada, will be more likely to remain that way for the forseeable future in the wake of Brexit. The immediate impact of the post-Brexit vote on Canada’s economy will be pressure to keep interest rates at historically low levels, explained BMO chief economist Douglas Porter and senior economist Robert Kavcic in a report last week.
Travellers looking to get the best bang for their buck might also consider booking trips to British destinations – taking advantage of the falling Sterling, and creating opportunities to save on some of the major costs associated with travel. The Bank of Canada’s consumer rate for British pounds Monday was 10 per cent better than a week ago. The rate quoted was $1.76 to £1. A week ago it was $1.96 to one.