June 29, 2016

Brexit Sales! What’s Now Cheaper

June 29, 2016

Brexit Sales! What’s Now Cheaper

With heightened levels of uncertainty hitting the UK, Europe and the globe as historic referendum vote by Britain to leave the EU was announced, there are some silver linings to the grey clouds.

Brexit is providing some benefits right now to consumers empowered with the freshly strengthened American dollar and an article in Time shows you just where you could be #winning.

Luxury Fashion in the USA

August Snow—Alamy

August Snow—Alamy

The assumption is that the plunging value of the British pound will mean goods imported to America from the U.K.—including merchandise from luxury U.K. brands like Burberry and Ted Baker—will be significantly cheaper in the future. But there’s so much up in the air at this point it’s impossible to put a timetable on when British goods will get a price cut in the U.S. Nor can anyone truly guarantee that Brexit will actually result in broad downward pricing trends for Americans making purchases of U.K. goods on U.S. soil. Among other reasons that British merchandise not get cheaper in America, British companies that import materials to create their goods are likely to face higher production costs–and these costs will probably be passed along to consumers.

“Overall, there’s a lot that we don’t know, or can’t know, at this point,” Mark Hamrick, senior economic analyst at Bankrate.com, said via email. “That includes how smoothly this U.K./E.U. divorce goes from here, whether other countries follow, what the terms are for both countries and the level of financial markets disruption.”

European Travel in General

Travelers have grown accustomed to bargain flights within Europe, but Britain’s decision to leave the EU is likely to make it more difficult and expensive to hop around on the continent. Still, the overwhelming effect of Brexit for Americans is that travel to Europe will be much more affordable, simply because of the exchange rate heavily skewed in our favor.

As Travel and Leisure pointed out, the American dollar is roughly 20% stronger compared to the British pound at this time last year. That means that pretty much everything purchased by American travelers in the U.K.—pints at the pub, takeout food, museum admissions, hotels—just effectively got a fat price cut. The discounts are just as widespread, though not quite as steep, in countries where the euro is the currency.

Real Estate in London

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The devalued British pound, combined with general uncertainty in London and the UK, is being viewed as a buying opportunity by foreigners with interest in real estate in London and throughout the country. “There is clearly some bargain-hunting going on among people looking to take advantage of the currency change,” Fionnuala Earley, residential research director at Hamptons International, said to the Financial Times.

While many real estate agents report increased interest—and offers—for properties in London, others say several buyers have pulled out of deals at the last minute because of all the upheaval. Some investors are also now trying to renegotiate get lower prices and better terms on nearly closed deals.

 

Whiskey and Wine

The U.K.’s whiskey makers don’t need to import much of anything from abroad to create their product, meaning that going forward it’s highly likely Scotland’s heralded whiskey should be less expensive when it’s imported to the U.S. “Whiskey prices will be cheaper,” Miron Woinicki, a professor of international economics at Vanderbilt University, explained to Vice. “When the pound is going down in value in relative terms, the dollar will appreciate against the pound. So British goods will be less expensive. Scotland doesn’t import anything to produce whiskey.”

Meanwhile, years of a strong U.S. dollar versus the euro have meant that European wines are generally less expensive for American consumers. “The market for bottled wine imports [in the U.S.] shows rising import volumes and falling import expenditures and prices, which is what the textbook analysis would suggest for products with an inelastic demand,” the Wine Economist explained earlier this year. As the value of the U.S. dollar continues to increase compared to the euro, its buying power will only grow as well.

Stocks

Generally speaking, Brexit and increased strength of the U.S. dollar are bad for U.S. companies that export goods abroad. This, as well as the overwhelming uncertainty in the stock market and the global economy, has resulted in a broad sell-off by investors that began on Friday and continued into this week.

The silver lining is that we could be in the midst of a terrific buying opportunity for investors. “This is a good time to work up a list of stocks that you wish you would have bought before they got too expensive,” my MONEY colleague Paul J. Limwrote. “Any significant drop in shares caused by geo-political jitters later this summer could signal an opportunity to pounce.”

(Article appeared in full in Time)

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