It seems increasingly likely that Boris Johnson will become Britain’s Prime Minister within a few weeks. Whatever your opinion on that, anyone with a major transaction coming up abroad – whether for a property, a business deal, school fees or anything else – should be factoring this into their plans.
At Smart we focus on three words: budget, risk, solution.
The budget element is the amount you need to fulfil your plans abroad. Maybe that’s $200,000 for a holiday home in the USA you are committed to buying, or several €10,000 stage payments for building work in France. You need to find that money whatever happens to the pound.
The risk is that the pound falls over that period, meaning you have to find much more money at short notice. And here we come to Boris Johnson – although none of the candidates could be said to have a cast-iron plan for a smooth Brexit in the near future, which is about the only thing that appears likely to rejuvenate the pound in the short term. Johnson has picked up the support of two previous candidates over the past few days, Esther McVey and Matt Hancock, and is now the very clear favourite.
Johnson has said he would not be worried by a fall in the pound of some 20% as predicted by the Bank of England if Brexit is disorderly. (Well, more disorderly). You can hear Boris Johnson’s thoughts on a serious depreciation in the value of the pound here.
But if that would be a risk to your own plans, then you need to find a solution.
The solution we would advocate for any upcoming transaction where a 20% fall in sterling would be a problem, is a Forward Contract. This locks in your rate for the year ahead.
If you have a transaction – or more specifically a contract for a transaction in the near future – please don’t “wait to see what happens”. When it happens it will be too late! We have already seen a 5% fall in the past few weeks. Call your trader today on 020 7898 0541 to find your budget, risk and solution.
