Brexit Strategy: British-Israeli Financial Expert Breaks Down UK/EU Vote Aftermath
Daniel Abrahams, the British CEO of a Tel Aviv-based Fintech startup, has been riding an emotional roller coaster ever since the UK voted to exit the European Union (EU) last week.
As the UK’s tumultuous decision to ‘Brexit’ the EU wiped out trillions of dollars in global markets and sent the British pound spiraling downwards amid uncertainty about the future of the UK, EU and the wider world economies; Abrahams and his currency company found themselves in the eye of the storm.
“I was a very vocal supporter of the UK remaining in the European Union,” Abrahams, an Anglo-Israeli entrepreneur, who was born and raised in North London and immigrated to Israel this year, tells NoCamels. “I personally voted for ‘bremain’ (to stay in), but unfortunately the majority (52%) voted to leave (‘brexit’).”
Doom & gloom
The CEO of CurrencyTransfer.com, an award winning currency management platform with offices in London & Tel Aviv, Abrahams related that ‘doom and gloom’ is the prevailing sentiment among most of the business associates he’s spoken to and the fintech scene in general is feeling down.
“The general mood is subdued and I strongly believe that for the whole country to be in a state of limbo for an extended period of time isn’t healthy,” Abrahams laments. “I mean gosh, in the last week we’ve lost our prime minister, the opposition leader is about to go and, even our football manager is now gone! Many of my friends feel hurt and angry that the freedom of movement in the EU, once taken for granted, is now gone. I just hope the talent pool does not dry up.”
While Abrahams believes that his countrymen will respect the results of the vote and move on from it, there is a sense of worry as the UK enters what he refers to as ‘the high seas’.
“In times of huge uncertainty, less deals are done,” Abrahams added. “Mergers and acquisitions dry up. This cannot be good for the economy. The UK is a resilient nation and we can only hope now to do the best trade deals possible.”
At the same time, however, his currency management platform, which helps individuals and companies to transfer money internationally at a fraction of the cost of banks, recently hit a milestone of $100 million traded on its marketplace.
“With the sterling (pound) retreating big time, many of our clients who buy products from Europe and the US are suddenly facing a much more expensive cost of doing business,” Abrahams expalins. “Margins will suffer, profits will be squeezed and have an adverse effect on UK purchasing power. It’s a huge adjustment for the tens of thousands of small businesses who do business abroad.”
Hesitation can be costly
“Clients who held off making transfers and expected ‘bremain’ are now licking their wounds,” Abrahams said. “The strongest trend observed was that of clients with foreign currencies piling back into the pound to profit from the momentum of the drop. For example, Brits who owned houses on the continent and repatriating their Euros back home or the UK exporters earning revenues outside of the UK and bringing funds back home. These clients definitely benefited from the vote going in favor of brexit.”
On the other hand, Abrahams says that panic definitely set in for clients who don’t have the luxury of taking a ‘wait and see’ approach to their international transfers. As a result of brexit, his company has extended its office hours to deal with the much higher than normal volume of registration, activations, and first transfers, all in a very short period of time.
In fact, Abrahams reported that from the end of last week and the early part of this week, his platform has seen a 500 percent increase in transfers, helping clients move millions of dollars a day.
A cautionary tale
“We work a lot in the charity sector,” Abrahams said. “Prior to the vote, a CFO of a major UK charity spoke to us about booking a long-dated forward contact on CurrencyTransfer.com for his shekel exposure. He was generally getting nervous regarding the uncertainty and 5.72 seemed a strong rate [Now 1 pounds equals only 5.18 shekels]. Over the weekend, he was caught ill and was hospitalized for several days. He never had a chance to book his trade and he has now lost potentially a significant amount of resources for a particular project. The moral of the story? Companies, new immigrants and property buying clients now need to take a proactive approach and think carefully about currency planning. It can massively help to protect profit margins and help budgeting.”
Looking outside the UK
Turning to Israel, where Abrahams is now based, he says Israeli companies who previously looked at the UK for their European headquarters may now consider other cities, like Berlin. Although he says it’s extremely hard to call how this will play out, “Israel is definitely losing a good friend in the EU and on this level, we could be affected in Brussels.”
“Harmonization of financial regulation is now at risk for firms setting up in the UK. Right now, we all benefit from that one FCA regulation being passported across Europe. Sadly, unless some type of deal is done, entrepreneurs may now need to do a European tour getting regulated country by country.”
The biggest fear, in Abraham’s opinion, may be a domino effect, with other nations and their politicians now calling for similar referendums to the one in the UK.
A new low for the pound
“When the British pound hit a near 31 year low on Friday morning, it was violent and unexpected. One school of thought is that the market has fully priced the Brexit event, and its direct consequences. However, the worst could yet come. The economic loss caused by the referendum could trigger interest rate decreases, and further political instability could in turn devalue the pound against other major currencies. We need to understand better the length and breadth of economic uncertainty caused by Brexit.”
Regarding the future of his own company, Abrahams puts an optimistic spin on things. “Whilst our roots are in the UK, we are building a global company in a multi trillion dollar a year market. We cover hundreds of different currency routes and are still very early stage in our journey. Our marketplace model allows us to scale fast, and allows us to evaluate different market entry projects.
If only I could shake my crystal currency ball, I’d be able to tell you which way we’re headed.”
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