Much of the discussion about Brexit involves the economy, which is already shifting in anticipation of … what? The trouble is, no one is quite sure what the impact will be and how it will change the market for transactions such as B2B payments.
While those in favor of Brexit are eager for a more economically independent United Kingdom, others hope that the withdrawal agreement will come with lenient tariffs, not just at the Irish border, but for trade across the United Kingdom and European Union. Unfortunately, only time (and an approved withdrawal agreement) will tell how the trade relationship between the United Kingdom and Europe continues.
Politics aside, the United Kingdom has already seen changes to their market and businesses since the original Brexit vote in late 2016. The pound sterling (GBP), which dropped drastically after the majority of United Kingdom citizens voted to leave the European Union, remains weakened in comparison to the United States dollar (USD). The approach of each Brexit deadline has triggered a slight drop in the market, followed by a recovery a few days after the granted extensions.
The GBP and Euro (EUR) have become tied to shifts in the political sphere, rather than the market. Companies are making financial decisions in anticipation of a plummeting currency values caused by Brexit. Many banks have already moved their home offices from London to various European cities. Healthcare facilities are stockpiling life-saving medicines in the event of a shortage. United Kingdom-based businesses are reducing their investments and employment opportunities.
With a diminished value for pound sterling, currency exchanges between USD, GBP, and EUR won’t be very attractive for a while, especially when considering the added per-payment fees charged by banks to transmit funds across international borders. Global businesses depend on stable markets to keep exchange rates as uniform as possible; someone will always be paying the difference, whether it’s the buyer purchasing more currency, or the supplier receiving a reduced amount.
Companies whose accounts payable teams have adopted payment automation into their processes can use their rebates to mitigate irregular exchange rates. Payment solutions that lower the cost of electronic payments through exchange rate transparency ultimately improve the buyer’s relationships with their suppliers.
The United Kingdom and European Union are in a transitory stage, and that is an enormous understatement. The Brexit experience is genuinely frustrating because it has no precedent, so no one’s sure what will ultimately happen. Economic growth may stagnate for a while, but as with any market, where there are ebbs, there will be flows. The only thing left to do is what the United Kingdom already does best: “Keep calm and carry on."
