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Brexit Vote Aftermath

The vote to leave the EU puts the UK through the looking-glass, but it is quite possible that things will not be very different to what they are today.

Over the past few days we have received many e-mails from readers seeking advice on the implications of the UK referendum result for current and prospective British property owners in France.

The responses to those mails will have disappointed those who have written to us, for with the future down to political choices that have yet to be made there are few clear answers.

Short-Term

The immediate consequence of the vote has been the substantial fall in the value of Sterling, a development that will inevitably cause some hesitation amongst French property buyers and anxiety amongst resident owners.

However, it is far from doom and gloom, for the evidence so far from our own database is that the result has not fundamentally altered the desire of most prospective buyers to continue with their plans.

It seems that most Brits consider rural property to be so cheap in France that it makes little difference and that it makes sense to buy now before the currency position becomes even less favourable.

Will there be a permanently lower Pound against the Euro? It is simply too early to call, but it is reasonable to assume that if the divorce is handled well it will recover; Euroland itself remains in a grave economic and financial crisis, so there are as many questions about the future of the Euro itself as of Sterling.

Ironically, the lower Pound will be welcomed by those seeking to sell in France, although the level of their satisfaction may be tempered by the prospect that there could well be downward pressure on the price of property in France in those areas traditionally popular with UK buyers.

As for the legal position, in the short-term at least it is a little clearer and more reassuring.

The rights of UK nationals to travel, live and work in Europe remain in place until the UK actually goes through the exit door. That will not be completed for several years.

Even when it takes place the withdrawal agreement would need to provide for transitional arrangements after the UK leaves the EU, as occurred when Greenland withdrew in 1985.

That agreement would need to cover the position of around 1.2 million British expatriates living in Europe and 3 million EU nationals in the UK. The migratory waves that would occur without some security being offered to those living and working abroad is simply not one that leaders in Europe could contemplate. Statements by some senior politicians in UK that this is a negotiable issue is simply political posturing.

During the referendum campaign even the leading campaign group Leave.EU stated that "The EU would be obliged to grant permanent settlement rights to Britons living in Ireland and mainland Europe. The UK would do the same.”

Many lawyers also argue that existing expatriates have acquired enforceable rights derived from European and national laws that almost certainly cannot be removed, a view that was taken in the case of Greenland. These rights apply whether or not the UK is a member of the EU.

So it is quite likely that, in terms of rights, there will be little if any change for those who are resident in France at the time the UK actually breaks from the EU.

Long-Term

For those who seek to relocate to France after Brexit, their rights are going to depend on the model that is adopted between the UK and the rest of Europe.

Whether it will based on that used by Norway, Switzerland, Canada, or one more specifically designed for the UK, it is impossible to say, but decades of integration with Europe will require that some system of collective administration is put in place.

The responses thus far from the European Commission and national political leaders in Europe towards the British position have been mixed - some conciliatory, some less helpful.

Certainly in the short-term the European Commission is going to be reluctant to let the UK slip away without ensuring there is some discomfort, if only 'pour encourager les autres'.

So there is likely to be enormous public and private pressure in the coming months to drive the British government into a position where there is less than a full Brexit, or to even pull back from it.

However, it is less clear that taking a tough stance with the UK is ultimately in the interests of the EU.

The vote will have frightened the European Commission, who will want to search for ways of making the European Union a more popular and effective institution. Punishing those who disagree with it (vis Greece) may well prove counter-productive, spurring on the growing nationalist trend across Europe.

Indeed, it is possible that the British vote may be the beginning of the end of 'one size fits all' in Europe. Whilst some parts of the EU will move to closer union, a looser confederation is likely to emerge amongst other countries.

That fracture is already beginning to manifest itself, with France having stated this week that it is threatening to stop implementing a key European law on posted workers due to concerns about 'dumping social'. There are around 2 million posted (or seconded) workers in Europe, who pay the social security contributions of their national country, not those of the country in which they are working.

The French Prime Minister, Manuel Valls, has also stated that the Brexit result provided an opportunity to 'clarify' and 'restructure' Europe, notably by dealing with the abuse of using 'cheap' migrant labour.

Within the UK it is also likely that a more conciliatory position over Brexit will be adopted, and it is noteworthy that Brexiteers have already toned down their 'independence' rhetoric. They will be aware of the need to maintain national unity over a decision that spilt the country down the middle, and of the risk of financial and economic turmoil if Brexit is badly handled.

The task alone of divesting the body of European law from the British legislative code is monumental, with every prospect that much of it will remain in place. There would be complete commercial chaos if this does not occur.

Amongst key European leaders there will also be growing pressure to bring about a satisfactory resolution of the crisis.

In France, the economy and public finances are in bad shape and the government will want to minimise the level of turbulence that takes place so that it is not propelled into a further downward spiral. Millions of British also visit France each year for a holiday, and that will not be lost on the French government.

Angela Merkel, the German Chancellor, may still dominate proceedings in Europe, but her star has faded over her handling of the refuge crisis, and there are many leaders in Europe who are sympathetic to the British position.

There will also be concern in Europe that the UK may seek to offer generous concessions to companies in order to protect itself outside of the single market. The lowering of the company tax rate by George Osbourne, UK Chancellor, may be the first warning shots of that approach.

For all of these reasons, it is likely be in the interests of both sides to strike a deal sooner rather than later, and one that is not too traumatic; in an already fragile geopolitical and economic climate the longer the uncertainty goes on the worse for all it is likely to become.

Rights

Just what might be the future rights of UK nationals seeking to relocate to France is impossible to say, although it seems unlikely that there will be wholesale changes to present arrangements.

Visa - The most significant issue is just what visa requirements, if any, will be introduced, an issue far more problematic, for administrative, economic and legal reasons, than was portrayed by the 'Leave' campaign.

Clearly, if the UK imposes limits on EU nationals living and working in the UK, it is to be expected that UK nationals will lose their unlimited right of access to live and work in Europe.

Nevertheless, even the Brexiteers are not proposing a complete ban on immigration, so it is to be expected that a reciprocal agreement will be reached.

It may well be that some limited visa free access is permitted, or that there are quantitative restrictions, and/or that visas are only granted subject to certain conditions, such as income, language, or skills/talent.

It is inconceivable that there will be visa requirements merely to travel to France.

Property - Nothing will change in relation to the rights and process of the sale and purchase of French property, and British nationals will retain the same rights to ownership of property in France.

Taxation - Tax is governed by a separate UK/France treaty, which determines the basis on which expatriates in France and second home owners are taxed, although there could be an impact on some households regarding social charges (see below).

Health Cover - Beyond the threat to Sterling, the greatest substantive risk for expatriates is the possible loss of S1 health cover for pensioners. The S1 certificate gives free health insurance from the UK.

If the S1 is not maintained, pensioners would need to pay the 8% French health insurance contribution on net income above €10K pa.

However, at a minimum, reciprocal agreements would be put in place for existing pensioners in France who should retain their S1 cover.

Existing early retirees in France would also be entitled to continuing health cover within the French system through acquired rights.

Social Charges - Without an S1 it would also mean that pension income would cease to be exempt from social charges - currently charged at 7.4% or 4.3% depending on income, although government pensions would remain exempt.

The loss of both S1 cover and exemption from social charges may mean that for some pensioners it might be cheaper to take out private health insurance as social charges are not then payable on pension income.

Visitors - For visitors to France, it is possible that the existing EHIC health cover scheme will remain in place, as occurs with Swiss visitors.

Pensions - With limited exception the UK government provides for linking of pension income within the terms of social security agreements in place with countries outside of Europe and it can be anticipated this would occur in the event of EU withdrawal.

As for the remaining rights, the processes may well change, but it is highly probable that they will not be too dissimilar from what they are today.


David Yeates
editor@french-property.com

This article was featured in our Newsletter dated 05/07/2016




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