None of the gloomiest predictions of how a Hard Brexit could impact UK expats in the EU has come to pass. But there are complications.
By Nick Corbishley, for WOLF STREET:
As the long hand of the Brexit clock ticks its final seconds toward Midnight, tens of thousands of expats living in the EU are discovering, much to their dismay, that their UK bank accounts are about to be closed. After the transition agreement expires, on December 31, “passporting” rules that allow financial institutions to provide services across the EU will cease to apply. As a result, UK lenders will have to deal with a bewildering patchwork of national regulators on a country-by-country basis in order to continue offering banking services to their expat customers. Many have decided it’s not worth their while.
Barclays has closed an undisclosed number of accounts belonging to expats in Belgium, Estonia, Italy and Slovakia. Lloyds Banking Group, which includes Bank of Scotland, Halifax and Lloyds Bank, has confirmed it is closing 13,000 accounts belonging to customers based in Germany, Italy, the Netherlands, Portugal, the Republic of Ireland and Slovenia. Nationwide is closing at least 5,000 accounts held by overseas Britons. In total, the lender has 93,000 expat customers in the EU and has not yet decided whether its 88,000 other customers will also face closures.
People who depend on income from pensions and rental properties are likely to be hit particularly hard by this sudden withdrawal of banking services. Some account holders could be left in financial limbo, unable to make vital payments and direct debits. The affected expats are being advised to move their account to an alternative lender in the UK that will continue to offer services in their country of residence. Failing that, they can transfer all transactions to their EU account, which will mean having to pay carry charge fees and conversion charges for any transactions made to and from the UK.
As an expat who has lived in Spain for the last 20 years, I have so far been spared this fate. The probable reason for this is that Spain is home to some 300,000 of the just over 1 million formally registered British residents in the EU — far more than any other EU Member State. As such, it probably makes financial sense for UK banks to continue providing services to expats living here.
But other complications are arising. Like many other British expats living here, I am in a mad rush to exchange my UK driving license for a Spanish one. I don’t own a car or have any need of one, as I live in downtown Barcelona, and very rarely drive in Spain. That said, if I don’t exchange my license before the cutoff date, I will need to go through the rigmarole of passing a Spanish driving test to obtain a license. I have until December 31 to begin the process, which sounds easy enough. But navigating Spain’s labyrinthine bureaucracy is an ordeal at the best of times; in the midst of a global pandemic, with periodic lockdowns making it virtually impossible to even access government buildings, it is a logistical nightmare.
None of the gloomiest predictions of how a Hard Brexit could impact UK expats living in the EU — from loss of access to the public healthcare system to requiring a visa to live in your country of residence and travel in the EU — has come to pass. A small minority of Brits living in Spain became so consumed by fear of the potential fallout and/or disgusted by the British public’s insistence on leaving the EU that they bit the bullet and applied for a Spanish passport — a process that can take years to complete. In return, they must renounce their British nationality.
The lucky few who have Irish parents or grandparents have been able to apply for an Irish passport, which allows them to remain EU citizens without having to sacrifice their UK passport. They include a Liverpudlian friend of mine called Colin who lives in Galicia and writes a daily blog on the latest news and developments in Spain. He was able to apply for an Irish passport because his grandmother was born in Ireland and, thus, his father had automatically been an Irish citizen. “Ironically,” he says, “I don’t think my father ever knew he was both British and Irish, as very many folk born on Merseyside are.”
In the end, such drastic steps as changing your nationality or supplementing it were probably not necessary. The Withdrawal Agreement established that all Britons and their family members who were lawfully resident in the EU at the date of the UK’s withdrawal, on the 31st of January 2020, can stay under the same conditions that existed before Brexit. This means we will still be able to travel freely in the Schengen area for a period of 90 days in any 180-day period, not including time spent in the country in which we’re resident. There are also no restrictions on travel and stays in the UK, as long as we remain resident in the country in which we live. And we will retain access to the respective public healthcare system.
UK expats who arrived in Spain after Jan 30 or who didn’t have a residence permit before then must apply for one before December 30. During their stay in Spain, many of these people did not even legally register with local authorities, let alone become residents. To qualify, they must now meet the EU residence criteria on income and healthcare, which is not going to be easy. Thousands of so-called “snowbirds” — long-stay UK visitors who holiday in Spain for up to five or six months a year, many of whom have second homes in Spain — are now scrambling to start the registration process, after it emerged this week that UK citizens without residence permits will only be allowed to stay in a European country for a maximum of 90 days in any six-month period.
Another reason I consider myself fortunate is that unlike many fellow expats living in Spain, I do not earn any of my income in pounds sterling, which has already lost 20% of its value against the euro in the last five years, given the uncertainty of Brexit. Negotiations this weekend failed to deliver progress on the three remaining stumbling blocks: state aid rules, fishing rights and level-playing field rules. A “no (trade) deal” outcome may have been averted at the very last minute on Sunday, as UK Premier Boris Johnson and European Commission President Ursula von der Leyen agreed to “go the extra mile” to try to secure an agreement. Just one last deadline extension, for old times’ sake.
But at this late stage in proceedings, it will take little short of a miracle for both sides to make the necessary concessions that will make a meaningful deal possible. Which means no deal is still a likely outcome. And that is bad news for anyone who earns part or all of their income in sterling and spends it in euros, including, of course, pensioners. In Spain alone there are more than 100,000 UK pensioners, all of whom have seen the value in euros of their pension installments slide over the last four years.
Some analysts believe “no deal” is already baked into the exchange rate. Much will depend on how hard the economy is hit by the logistical chaos that is likely to ensue on Jan 1, as tightly intertwined supply chains begin snapping.
Careful attention should also be paid to what happens with the City of London’s all-important financial services industry. As the Bank of England itself warned on Friday, “some market volatility and disruption to financial services, particularly to EU-based clients, could arise” in the event of no deal. All of these issues will no doubt be compounded by the chaos already being caused by the Covid-19 pandemic.
For the roughly one million UK expats living in the EU and the 3 million EU citizens living in the UK, disaster has by and large been averted. Now, all we can do is sit tight and brace ourselves for what is coming, all the while hoping that both sides on the Brexit divide honor their pledges to us, even as relations between the UK and the EU take a giant turn for the worse. By Nick Corbishley, for WOLF STREET.
Some property owners are more exposed to the fallout than others. Read… Three Big Retailer Casualties in One Week: UK Retail Landlords Reel after Worst Week of Nightmare Year
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.