Brexit is happening – Britain has decided to leave the European Union this morning. It was a close result, and interestingly people under 50 voted to remain, but the older people of Britain carried the vote. Scotland voted strongly to remain in the union, and their politicians are already talking about a new referendum for them to leave the UK, so that they can remain in the EU.

The British Prime Minister has announced he will resign, so someone else will be navigating the exit deal, which will take up to two years to become final.

So how will Brexit affect Lanzarote, and our regular visitors and residents from Britain?

The further you look ahead, the more hazy it becomes, but here are my best guesses.

The Short Term

Sterling is in free fall – I saw a Tweet this morning from someone at Gatwick Airport saying the rate there is €1.07. The true rate as I type this is €1.24, down from €1.31 yesterday.

That means anyone from Britain booked to come here over the next few months will have less money to spend on the island. As Britain is our largest tourist market, the predicted 20% loss of value in Sterling will have a significant impact on the local economy over the next few months.

People aren’t going to cancel their holidays here, but they will have to spend less locally while they are on the island.

Local businesses on island can mitigate this by trying to attract more of the customers on the island from other Euro zone countries.

The Medium Term

As Sterling falls, the price of holidays here will increase for British tour operators. They tend to broker deals quite far ahead, so this may not kick in for several months. But if the price of flights and accommodation here increases, as is likely, then fewer people will choose Lanzarote as a destination. That could give us a double whammy of fewer tourists from the UK, spending less money.

Our tourism department needs to work hard now to attract visitors from other European countries, including the mainland of Spain, to reduce our reliance on the British market.

The Long Term

This is where it gets really hazy!

I’m guessing Sterling will eventually bounce back – a currency expert I spoke to this morning said it could take up to a year.

Visitors

I don’t think Spain will adopt a visa process for British visitors post Brexit – the market is too valuable. But the right to free emergency medical care will almost certainly disappear, so British tourists, as they do when they visit the US for example, will have to take out medical insurance.

Residents

For existing British people living in Lanzarote, we have “acquired rights” which means the terms under which we live here shouldn’t be dramatically affected. Assuming we are paying into the system, our medical cover, pension arrangements and property ownership shouldn’t change.

For those of us who work, there is a possibility that we will have to go back to the days of getting work permits, and for those who are retired, it’s likely their UK pensions will be frozen, as they are for Brits living in non EU countries currently.

There is a worry around inheritance tax. Until quite recently foreign EU citizens living in Spain paid a much higher rate of inheritance tax than locals. Ironically, it was the EU that outlawed the practice. But there will be nothing to stop Spain imposing that once again when Britain is no longer an EU member state.

One way long term residents here can deal with any concerns is to apply for Spanish citizenship.

People planning to move or retire here

This is the group most likely to be affected in the longer term. British people will no longer be entitled to live and work in Spain. It really is that simple.

My guess is that if Britain goes down the route of a points system for their own foreign immigration, then the EU will do something similar, or set up a system of work permits for those who want to do so, and a minimum level of capital for those who want to retire here.

For people with plenty of money, planning to retire here, I don’t see a big problem, but for others, planning to come over here to find work and live in the sunshine for a few years, I suspect entry will be denied. We have quite high unemployment here, and stopping British people from coming over in large numbers is likely to open up more jobs for local people. It’s actually the same argument used by Brexiters!

Other scenarios might include the need to have a Spanish partner in any new business set up, which was also the case here at one time.

Business

As a business, we currently trade into and buy from the UK. As en EU member it all works quite well – there are no tariffs, we don’t need any licences or permissions to buy or sell our goods, and the dreaded VAT can be ignored.

With Britain out of the EU, those agreements disappear. I have no doubt that some sectors in both the EU and in Britain will start to call for trade tariffs in order to protect their markets from strong competitors. Just to use one example, Britain is the “back door” into Europe for both Toyota and Nissan, who built their factories there quite deliberately to get access to the free market. Currently the EU imposes a 10% tariff on Japanese made vehicles, so would that be extended to British made cars? What other sectors will it apply to? What will happen about VAT in the future?

I don’t know the answers to those questions, but they concern me.

Businesses here can reduce their risk from Brexit by gradually reducing the amount they buy from the UK over the next two years, while seeking new markets within the EU to sell their own products.

I’m not an economist, or any kind of expert on international law, so please don’t take my suppositions above as “fact.” They are merely my best guess as a businessman and long term resident of Lanzarote as to how I think things will pan out over the next few years.