One of the biggest stories this week is the fact that the pound has fallen even further amidst worries about the implications of Brexit. So I have decided to do a simple Q&A to address some questions you may have about how this has affected me and British people in general when it comes to living with a weaker currency.
Q: The referendum was way back in June – why is the exchange rate still unstable?
A: The reason is that we still don’t know what form Brexit will take – there is now a debate between a hard and soft Brexit. A hard Brexit will mean that we effectively cut off our ties with the EU in a most brutal way in order to close the borders to more immigrants from the EU and also kick out a lot of low-skilled EU migrant workers here. A softer Brexit would mean negotiating to stay in the single market with the EU and working out some kind of compromise with the EU on issues of trade and immigration. This is contingent on so many different factors: on one hand, we have to see what kind of deal the EU is wishing to offer the UK given how angry they feel by the referendum vote and they will feel that offering the UK any kind of good deal may encourage other EU member states to go down the same route – so it is likely that they will play hard ball when it comes to any kind of negotiation.
On the other hand, PM Theresa May has got to offer the British public some kind of deal which has to include a tough stance on immigration as that is the one primary reason why the British public voted for Brexit. However, a tough stance on immigration would mean a terrible deal from the EU and that would well and truly wreck the British economy. You have the impossible situation whereby 52% of the British public are too stupid to realize that the British economy cannot function without these foreign workers and kicking them out would spell disaster for the British economy, yet they are so xenophobic and shortsighted that they would rather wreck their economy than to let these foreigners stay and work here. Talk about cutting off your nose to spite your face. As an Italian friend said to me, “if the British are dumb enough to do this to their own country, I’ll just shrug my shoulders and go back to Italy. Then they’ll wake up one day and realized how stupid they were but by then it will be too late.” Politicians like PM May want to remain in power, so she will want to look tough on the issue of immigration but she is smart enough not to crash the British economy for a generation just to win a few more votes. So the next few months are crucial, as the UK starts the former process of leaving the EU by invoking article 50 and until then, nobody quite knows what is going to happen and it is the uncertainty and fears that is keeping the pound weak.
Q: How has this affected you personally?
Well, I probably spent a bit more on my recent trip to the US than I planned, but how do I say this delicately – I’m not crazy rich but at least I’m a lot richer than the average Brit so regardless of what happens to the British economy in the near future, I’ll be okay. You see I had worked so many years in sales and acting, I’m used to having good months and bad months because a lot of my earnings depend on my commissions and getting my hands on lucrative contracts. My earnings do vary wildly month to month like an out-of-control yo-yo that has a mind of its own. In 2014 for example, the bulk of my earnings came in a 3 week period in spring, despite the act that I worked non-stop throughout the year – that was because I was working on an extremely lucrative project then and the amount of money I earned on that project dwarfed anything else I made that year. So when I have good months, I make sure I do not go on a spending spree but I invest the windfall I get so that in thinner months, I do not have to compromise my living standards.
I’ve been self-employed for many years so I am used to this kind of unpredictability when it comes to my earnings. Now contrast me to say someone who works full time for a company and gets a monthly salary – he is paid at the end of every month and he knows exactly how much money he will be paid, so he can plan for his expenses like his children’s school fees or his mortgage payments. I’m the polar opposite of that. My financial situation may look good when you look at my personal net worth and overall portfolio of investments, but if you were to look at the very erratic way I earn money, it may shock some people. But the bottom line is I’m treating this as just another potential ‘bad period’ that I will have to survive and I’ve gotten through plenty of ‘bad periods’ before in the past. It’s like living in Florida I guess – yeah once in a while you get a hurricane but overall, the weather is always quite warm and nice and that’s why so many people want live there. I have more good periods than bad periods, the same way Florida has more days with nice weather than hurricanes.
Furthermore, if you were to compare the value of the pound against the dollar from just before the referendum, it has lost about 15% of its value in that period. Am I annoyed by that? Sure I am. But the exchange rate isn’t fixed – the pound has been both strong and weak in different periods in the last 20 years. Besides, my income from month to month often fluctuates a lot more than just 15%. I am also working in sales again and if (fingers crossed), my first deal comes in this month, then my income will jump a lot more than 15% in this month. I remember what my old boss used to say, “you work in sales, you write your own paycheck. You want a raise? Simple, just sell more, your fate is in your hands.” So at the back of my mind, I know I can always work a lot harder, sell a lot more to make sure I earn more money to weather out any storm that may hit the UK economy. Such is the benefit of working in sales – it may not be the most fun job in the world, but damn it can be lucrative. So as you can see, it will affect others far more than me, I’m doing okay for now especially since I am currently working on a German project and am being paid in Euros for it (thus the weaker the pound, the more my Euros are worth).
Q: Do you intend to leave the UK if the pound remains weak?
The short answer is no. It would take nothing less than a complete disaster to force me out of London – it is my home, it is where my life is, it is where my friends are, it is where I have work. You see, my ability to earn good money doesn’t depend on the exchange rate – it depends more on my connections, knowing people who recognize my skills and are willing to give me lucrative contracts. You can pick a country with a strong currency – like Switzerland for example, the Swiss Franc has been very strong but even if I moved to Geneva tomorrow, I would be starting from scratch in a city where I don’t know anyone. Trying to find work would take time and there’s no guarantee that I would be able to find a job that I like there. Contrast that to London where I have lived for nearly 20 years, I have so many friends and professional connections where who make it very easy for me to get very well paid work. So no, it makes no sense for me to remove myself from London at this stage in my life. I have little to gain by leaving London now. So no, I’m not going anywhere and have no plans to. I know things are bad but I will ride out this storm the same way I have rode out previous recessions.
Q: How will this affect Brits? Will this lead to more hardship for British people?
Yes, undoubtedly. But let’s explore the different ways a weaker pound may affect the Brits. firstly, it may not all be bad news. A weaker pound will make exports cheaper and may give manufacturing a boost. Secondly, tourists coming to the UK now will find it a lot cheaper and so we’re expecting a boom for the tourism industry. So anyone working in manufacturing or tourism may find business actually improving with a weaker pound – any rise in costs from a weaker pound will be balanced out by an increase in revenue. It is not all bad news really. However, a weaker pound means more expensive imports – so Brits who buy stuff from abroad will end up paying a lot more for such foreign goods. Those who travel abroad will find their holidays more expensive with a weaker pound. However, this will affect different British people differently because it is a fallacy to treat ‘British people’ as a monolithic entity, of course.
Rich Brits will continue traveling abroad and having nice holidays even if the pound weakens – so if it increases the cost of a holiday by 15% then guess what? Richer folks will still be able to afford their skiing holidays and luxury cruises because they are rich. These are wealthy people who stay in five star hotels and eat at Michelin-star restaurants when on holiday anyway, spending 15% more on a holiday is no big deal for them. Now compare that to a working class family who are only able to go on holiday one a year if they book the cheapest budget airline, stay in the cheapest hostel and are very careful with what attractions they can afford to visit whilst on holiday. Increase the price by 15% and it may make the holiday simply unaffordable. Likewise, imagine if the price of a winter coat increases by 15% because the coat is imported from abroad – rich folks would not bat an eyelid about paying 15% more if they like the design of the coat. For poorer folks, they may no longer be able to afford the coat anymore. Get it? Poor people will suffer a lot more because they are poor.
Now if you are a rich person reading this, you may find this hard to believe but there are a lot of Brits who literally have no savings at all. They spend what they earn, down to the very last penny, often getting into debt after they run out of money. This is particularly true with young people who have borrowed money to go to university and have a lot of student loans to repay upon graduation. A quarter of Britons have no money put aside for a ‘rainy day’, with a third relying on credit cards to pay for emergencies, This may seem quite shocking to Singaporeans who have a far greater culture of saving money (because of the compulsory CPF scheme and Asian culture) but any increase in high street prices because of a weaker pound will hit these people who have no savings particularly hard. And may I state the obvious? Why do you think these British people have no savings? It is because they barely have enough money to make ends meet, never mind entertain the concept of putting money aside for a ‘rainy day’ or retirement. Just to put food on the table and pay their bills, they spend every penny they earn and they are the ones who will be hit hardest by the rise in prices – ironically, such people are the ones most likely to have voted for Brexit. What can I say, karma is a bitch.
Q: Will it take to make the pound rise again?
I do believe that the pound will rise again in the long run (but how long it will take to recover is another question). This is a self-inflicted recession – the British economy was making a steady and strong recovery from the last recession until the stupid Brexit vote. There is fundamentally nothing wrong with the British economy the way it was, but now we have to allow the economy to readjust outside the European Union. Many industries will have to find new ways to operate outside the EU and even redefine their roles if they are no longer able to perform certain functions outside the EU. A well-negotiated, soft Brexit which guarantees the UK continued access to the common market will definitely boost confidence in the British market and a step in the right direction would be appointing someone who knows what s/he is doing to lead such negotiations. The British economy is in trouble now and we need good leader(s) to steer us out of these troubled waters – the main reason why the pound is so weak is because investors don’t like the uncertainty of the situation we are in right now and if the government can do something to reassure the investors, then the pound will definitely strengthened. This of course, is easier said than done, because the voters have chosen the worse of two options but recovery will come – hopefully sooner rather than later under good leadership.
Q: What factors may cause the pound to fall even further?
Simple: a hard Brexit will send the British economy into free fall, the economy will crash, unemployment will rise and all these EU migrant workers will say, “f#ck this shit, you’re going to become the poorest country in Europe – I’m going back to Poland because your currency is worthless etc.” The pound will fall below the value of the dollar and the UK would suffer for over a generation. Making your country the basket case of Europe, to completely destroy your own economy just to spite the migrant workers who are here – well, that’s what xenophobia will lead to. The liberal ones on the left (such as yours truly) will be judging those on the right but there’s only so much Schadenfreude I can enjoy when I say, “I told you so, now everyone in your street is unemployed – there may be no Eastern Europeans left but you’ve destroyed your own country in the process. I hope you realize what a dumb mistake you’ve made, suddenly the idea of having Polish colleagues and neighbours doesn’t seem that bad, eh?” Some politicians will push for a hard Brexit just for short term gains to win more votes from the xenophobic sections of the society, I didn’t think that was possible but I didn’t think Brexit was either.
Q: How has this affected the EU migrant workers in the UK?
A: My European friends who are working in the UK tend to be highly skilled professionals: one of my best friends, for example, is head of structured credit at the London office of a French investment bank (and he’s French). Yes a weaker pound annoys him as much as it annoys me, but the fact is he is earning so much money that it is little more than an annoyance for him for now, rather than something so problematic that will drive him out of the UK. Someone like him will be able to get whatever work permit necessary to continue working in the UK post-Brexit because he is so highly skilled. You think I’m rich – wait till you see the house he lives in or the car he drives. Compare this to the staff at my local supermarket who are mostly Polish – many of them came here to work because they can earn a lot more working in London compared to in Poland. As the pound weakens against the Polish Zloty, suddenly it represents a real pay cut for them, especially if they are sending a lot of their earnings back to Poland to feed and raise the rest of their families there. So yeah, for people like that, a weaker pound may encourage them to leave the UK and seek work elsewhere, particularly a country with a stronger currency.
This is why it is a fallacy to lump both a French investment banker and a Polish supermarket worker into the same category as “EU migrant workers” – it is clearly not a monolithic entity. So the migrant workers who are doing the jobs on the low-end of the food chain, doing manual work at barely the minimum wage will probably want to leave the UK because a fall in the value of the pound will mean that it is hardly worth them working here to try to send money back home. However, the those on the upper echelons of the food chain are far less affected as they are very rich. Slash the wages of a supermarket worker by 15% and he may say, f#ck this I’m quitting, it is not worth it. Slash the wages of an investment banker by 15% and he will probably find a way to make up that 15% elsewhere or even simply just accept it because he is still earning a lot of money.
Q: So in short, you’re saying you don’t care because you’re rich and it’ll only affect the poor? What kind of monster are you? You sound like a really hardcore right-wing capitalist, I thought you were quite liberal.
A: You’re right. That’s exactly how I feel about the poor. They were the ones who voted for Brexit and now they are the ones suffering the most from Brexit. Like I said, karma is a bitch which has come back to bite them in the ass, where it hurts the most. Poor people are the ones most likely to worry about immigration, about competing with hard working Eastern European migrant workers for the same jobs. I live in London, do you think the streets of London are paved with gold? No way, all Eastern European workers who come here have to work their butts off to make money like everyone else here. My attitude is very much, “你有本事, 你能找到工作,你来啦”. (“If you have the ability, you can find a job, then by all means come.”) I’m not afraid or worried at all about competing with migant workers who want to compete with me because I am very confident in my abilities to compete with the best. Those at the bottom of the food chain however, are not confident like me as they do not have the same skills so they give in to fear and xenophobia. What they should have done was to try to fix the system, which would help them gain more skills and training in order to access better jobs and earn more. Instead they voted to crash the system – how do you expect me to have any compassion for poor people after this? They deserve nothing more than what they have voted for. As we say, “you’ve made your bed, now lie in it.”
So that’s it from me for now. Are you affected or concerned by the weaker pound? Please let me know if you have any other questions on this issue – leave a comment below and we can talk about it. Many thanks for reading.
Limpeh Is Foreign Talent is a former Singaporean who has worked in over 10 countries in Europe and the Middle East.