Weak GBP Not Necessarily Bad for All UK Workers
Generous Salary Increases in the Offing As GBP Slumps
One of the unintended consequences of the Brexit vote is a rise in earnings. Contrary to expectations, weakness in the GBP is actually beneficial to UK workers earning in foreign currency. This is especially true of workers in the oil industry, high-tech executives, investment bankers, ambassadors and MEPs. All in all, the number of people who will benefit from GBP weakness amounts to 200,000. The historic Brexit vote on June 23, 2016 resulted in a majority yes decision to leave the European Union. The ensuing weakness for the GBP since then has been unprecedented. The pound slumped to a 31-year low against the dollar, and declines continue unabated. The Bank of England Governor, Mark Carney warned against the Brexit perils, but so far the UK economy has weathered the storm.
Economists have recently released startling information that confirms as many as 200,000 employees in the United Kingdom will enjoy significant increases in their earnings. Rising wages are a direct result of JPY, EUR and USD strength vis-a-vis the GBP. When these workers receive their payments in foreign currencies, the rewards are significantly more when repatriated back to the United Kingdom. The benefits in GBP could be as high as 15% – far greater than the rate of inflation currently in the United Kingdom. For example, all the people working in Ireland, from Northern Ireland receive payment in EUR. For the finance professionals working for the International Monetary Fund (IMF), the European Central Bank (ECB) and other EU financial entities, the payment benefits are equally enticing.
UK Morgan Stanley (MS) Employees are Paid in Forex
Other beneficiaries are those working for oil and gas companies, MEPs and the like. Ironically, many of the foreign-based earnings are not repatriated back to the UK because the workers live in European countries. Since no official records are available, it is left to analysts to determine the number of employees working abroad. The 200,000 figure was compiled by Ray Bolger from John Charcol. Goldman Sachs (GS) in the UK employs hundreds of bankers who will be receiving a sharp uptick in their salaries by January 2017. However, the salary increase will an average of the GBP/USD currency pair for the whole of 2016. Additionally, some 6,000 employees of the UK branch of Morgan Stanley are paid in currency other than the GBP. While many banks acknowledge that their staff receive salaries in foreign currency, it is still possible to personalise how those payments are made.
The benefits enjoyed by those paid in foreign currencies are not available to the rest of the populace. UK-salaried workers are subject to lower real wages as a result of a weakening GBP. With the prospect of a slowdown in manufacturing, imports and exports, the real purchasing power of the GBP is declining. While many blue-collar workers expect to have more jobs available – at higher pay – when immigration is limited, this will likely be offset by poor wage growth. The GBP/USD currency pair is down 17.41% for the year-to-date. The GBP/EUR currency pair is trading 17.65% down for the year-to-date and the GBP/JPY pair is down 28.42% for the year-to-date. UK workers paid in these currencies will certainly enjoy repatriated earnings benefits as long as the GBP remains under pressure.
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for iForexTrader.co.uk.