EDINBURGH, Scotland–The United Kingdom’s exit from the European Union, better known as the hotly-debated Brexit, will affect every aspect of life for residents of the U.K., and that includes credit unions.
Just what those effects will be are still being sorted out by the country’s credit union leaders, with one person saying Brexit has led to “unintended consequences” that are only now being realized. The United Kingdom officially left the European Union on Jan. 31, 2020, but the two sides had reached an agreement to continue to work through an almost countless number of issues. The EU accounts for approximately 43% of all U.K. exports and 51% of all imports.
One of those attempting to make sense of what Brexit means for credit unions is Marlene Shiels, CEO of Capital Credit Union. Shiels is well known to many in the United States for her work in credit unions internationally. Below, she shares her insights with CUToday.info’s audience in this Q&A:
CUToday.info: What will Brexit mean specifically to your credit union?
Shiels: The U.K. credit union legislation does not allow credit unions to trade outside of the U.K., so as financial firms there is no real impact on our ability to attract members and lend to those that live and work in the U.K.
However, there are many other impacts and unintended consequences we are now learning as a result of our withdrawal from the European Union.
CUToday.info: What is some of the fallout that many (including CU leaders) may not have envisioned?
Shiels: The full impact of Brexit is still not yet known as there are more complicated negotiations ongoing specifically in relation to Northern Ireland (which shares an “open” border with a European country, i.e., the Republic of Ireland). Notwithstanding these negotiations, the impacts on other aspects of life have been not inconsiderable for residents of the U.K., our economy and how we “do things around here.” Of course, we are also in the middle of a pandemic.
At a very high level a sample of some of the impacts that are being felt by members are:
Marlene Shiels
- Our economy is still in recession (pandemic and Brexit). We are looking down the barrel of negative interest rates, unemployment is high, and the increase of people on a debt cliff edge is growing rapidly.
- If the Bank of England moves to negative interest rates, “free” credit union membership and CU pay benefits could end as CUs might have to incur significant costs to place liquid funds in banks. Rightly or wrongly, CUs in the U.K. are carrying significant liquid assets right now.
- Availability of some foods from Europe is reduced. This was particularly so the first couple of weeks in January as goods were held up in France – our gateway to the European mainland.
- The cost of goods online coming from Europe now have tax and cross-border charges for the first time.
- Taking pets (principally dogs) to Northern Ireland, which is part of the United Kingdom, now requires a pet passport and vet certificate for every journey (again because of the NI border with the Republic of Ireland). Dogs also now have to be vaccinated against rabies, which has been stamped out in Europe for many years.
- Gas (petrol) prices are fluctuating and have been very high recently.
- Although U.K. CUs do not trade in Europe, we have many small companies in financial services (and large, too), whereby Europe has been a major customer base. An example of losing this customer base was the insurance market, whereby last year policies could not be renewed beyond December 2020 as there was no longer “passporting” arrangements between countries (open access between countries to sell products).
- All the legislative framework that had come from Europe has also had to be re-written, which was a gigantic task.
- The ability to receive free health care in an emergency in Europe will no longer apply to U.K. citizens.
CUToday.info: When did you first become aware of what the fallout/affects would be, and has that changed (as the terms of Brexit were being negotiated)?
Shiels: Great question. Most of what we now know about the agreement to leave the European Union came after the end of the transition period (December 2020). Indeed, we are still, as a nation, trying to work out what else was agreed and is still to come to the public’s attention.
CUToday.info: What will Brexit mean for your members?
Shiels: Possibly the biggest impact will be the freedom of travel. As we are no longer Europeans, we cannot travel freely in and out of other European countries. We will be moving back to a U.K.-only passport.
Some countries are already introducing visa systems to travel, and there has already been people turned back from entering countries due to the lack of preparations, despite having four years to prepare! Travel may not be too much of an issue in a pandemic, but when borders are open again for holiday and work-related travel it is likely to cause chaos and confusion at airports.
Without access to health care in an emergency, travel insurance will also be an absolute requirement. As mentioned above, the price of goods inwards has been creeping up a little and there have been some horror stories of people ordering goods online, for them to arrive from European destinations, and there have been huge courier charges on top of what has already been paid for the goods.
CUToday.info: What will Brexit mean for Scotland, in your opinion?
Shiels: This is a really difficult question to answer and somewhat depends on your politics and aspirations. As a development educator you would expect me to say that we are “stronger together” and I do believe that. To become independent from the U.K. would be an even bigger step than the U.K. leaving Europe.
Economically, I don’t know if we can generate enough income as a country to meet the obligations we would have. I recall when Ireland joined the E.U. (having been born there), that the price of everyday goods went sky high when the country changed its currency to the Euro.
I do not think, in the current climate, with increased unemployment, a pandemic, and more people becoming less financially resilient, that this would be a good thing for Scotland. However, I am neither a politician nor an economist!
CUToday.info: How have you/the credit union responded?
Shiels: Brexit and the pandemic are both making life difficult for a lot of our members and we have come at this from a member’s perspective. We have been developing a new Members Charter (our commitment to our members) and a new Financial Wellbeing package.
Some simple things we have been doing, for example, include revamping our loans to have “payment holidays” built should you have a shortfall or have reduced hours at work for period of time, and providing interest-free loans for our health care workers as a goodwill gesture. We have accelerated our digital offering for members (our office is closed to members due to government rules).
We are working through employers to help more people start a savings habit to build financial resilience for the future.
CUToday.info: Are you working with any other credit unions in response?
Shiels: Capital Credit Union is a member of the National Credit Union Forum, which is seven of the largest and most progressive thinking CUs in the U.K. We work very collaboratively at the CEO and board level.
The NCUF is also a member of the National Liaison Group of Credit Unions, which is a group made up from all the trade associations in the United Kingdom. We didn’t always work well together as co-operators, but that has changed significantly over the past 18 months and national trade bodies are working very well together for the benefit of all credit unions.
CUToday.info: Where to from here?
Shiels: Credit unions in the U.K. still have one of (if not) the most restrictive legislative framework in the world. A major part of the collaboration currently taking place is to lobby government to relax these restrictions and allow credit unions to offer more products and services, and where a credit union chooses, to become the primary financial institution.
We would be classed a “vanilla” credit union due to the restricted products and services we are able to offer. We need to get the legislative reform in place to see more mergers to create strength and economy of scale, and we need to become more innovative and attractive to a wider range of people.