An essential service for expats, the foreign exchange industry hasn’t been spared by the pandemic and fluctuations in stock markets.
In this article, we speak to Vanna Kadir of XE, our Foreign Exchange E-Team member in Sydney, to get an insight into the movement of money around the world.
The pandemic hits
“At the start of the pandemic, as the lockdowns started around the world, we did see a drop in international money transfers,” explained Vanna.
“Many clients were holding their liquidity close, due to increased volatility and uncertainty,” she continued, “planned purchases abroad were put on hold. Business orders were either cancelled or postponed, especially around the early months where we saw COVID-19 hit its peak in China and as a result, affecting importers in the APAC region.”
However, funds transfers continued for ‘essential services.’
Vanna commented, “whilst the pandemic has affected all business in some way, shape or form, a small portion of businesses have actually grown as a result of the pandemic such as the food, tech and healthcare industries.”
“On the individual front, payments being sent home to support families by expats have continued.”
“During increased volatility, we did see shifts in where money was being transferred to and being transferred from,” explained Vanna.
Start of the recovery
As parts of the world have started to recover whilst other parts are battling a second wave, currency markets have regained momentum.
“The AUD has remained elevated over the last month as markets have tried to price in a recovery from the COVID-19 pandemic. This is despite a renewed outbreak in Australia, albeit only relatively minor compared with the USA,” commented Vanna.
“As we head towards the end of the year, there are clouds on the horizon as case numbers keep creeping up and US / China relations look like they are set to deteriorate as the US heads towards their Presidential Election on November 3rd.”
Vanna continued, “overall, we see current levels as attractive for expats.”
“Expats should be looking at ways to mitigate their risk against currency fluctuations and speaking to their FX broker prior to the transfer, especially in this current environment where there are still many uncertainties in the local and wider economy. Risk management is paramount and will often leave you with more money,” recommended Vanna.
The ongoing effect of COVID19
“We have been operating as normal,” concluded Vanna. “The global banking system seems to be coping very well and we expect this to continue.”
It’s become clear for some time now, that as well as the short-term impacts that Covid-19 has had on countries worldwide, there will be many long-lasting impacts, the likes of which we have yet to fully understand.
The devastating effects that this virus has had on people’s health has been felt the world over, however each country has been impacted in different ways when it comes to the economic and social consequences of this global pandemic.
In this article, our E-Team Group Leaders in London, Phil Oakley from Gerson Relocation and Ian Miles from James Cowper Kreston, have given us some insights into what they believe are the short, medium and long term effects that Covid-19 will have or has had on the UK.
“The UK has seen a dramatic fall in its GDP since the start of the lockdown with the travel and financial markets adversely affected,” Phil Oakley tells us, which has already created adverse short-term effects.
Most importantly, the drop in economic output has meant that “there has also been a large rise in unemployment due to businesses either looking to cut costs or not being able to sustain business,” explains Phil.
Ian Miles gives us an insight into some of the main industries that are struggling in the UK right now, mainly “the travel and hospitality industries, pubs and restaurants, and of course, the Arts.” For the people working in these industries, there is an uncertainty in regard to how long Government support will last, and what they are going to do when it ends. This unemployment that has been on the rise is set to remain high, as many businesses have been forced to close down permanently or downsize.
The UK’s expat community is not immune to this rise in unemployment. Phil tells us that during this pandemic, many expats living and working in the UK have had to return back to their home countries, which has led to a rise in cancelled assignments. The UK’s economic downturn has also meant that there has been a drop in the number of global assignments available in the financial services sector.
One sector of the UK economy which has led to a rise in both “recruitment and mobility”, according to Phil, is the Pharmaceutical industry, due to an increase in Research and Development. However, this is one of a very few industries that is not struggling to ensure job security.
In addition to the clear economic ramifications that Covid-19 has been having in the short term, it has also had an impact on many people’s family lives. While some people have embraced the ‘Work from Home’ philosophy, others are struggling to multitask working from home, with home-schooling their children.
Furthermore, with schools trying to re-open safely, it is difficult when expats need to continue travelling for work. Ian poses the questions, “If an employee goes on a short-term foreign business trip, will the individual be able to get back? If they can, will they then need to self-isolate together with their family for 14 days?” The concern here is whether this self-isolation could prejudice children trying to return to school.
Medium Term/Long Term
In the medium to long term, people will start to adjust to the restrictive environment even when the rules are removed. The most evident area we will see this is in the workplace.
As people in the UK begin to adjust to working with restrictions in place, Ian predicts that there will be an increased reliance on technology, in particular the use of video calling and meetings. “Meetings seem to take half the time that face to face meetings take,” he observes. These new adjustments will include a decrease in travelling for work, as businesses adapt to the “new normal”, with travel restrictions still heavily enforced in the UK.
In terms of the long-term success of the UK economy, both Ian and Phil agree that it’s almost impossible to predict how long the recovery process will take. This recovery is dependent on the length of time social distancing is going to be in place for, as well as potential spikes in Covid-19 outbreaks leading to the need for future lockdowns.
Whether you are thinking of moving home to the UK now or at some point in the future, there are certain things you need to consider and plan for.
Join our London E-Team members where they outline what UK expats need to consider when moving back home, including:
- Carefully planning your tax position to ensure you don’t receive an unexpected tax bill
- Favorably structuring your financial position to protect your assets and wealth
- Timing of education enrollment for your children
- Restrictions and obligations if you are moving back with your pet
If you are a UK expat living abroad you need to attend this webinar.
Details of the webinar:
Date: Wednesday 2nd September
Time: 10am – 11am (London local time)