While Brexit has generated anxiety among economists and world governments (which has already abated somewhat), there are some signs that the short-term consequences could actually be a boon for the United States, and in turn may have a positive impact on 2016 year-end giving for nonprofits and fundraisers.
As has already been well-documented (and discussed in detail here on The Tap), Brexit has amounted to a self-inflicted wound for Great Britain, which is reeling in the EU referendum’s aftermath. Britain’s departure from the EU has sent the pound plumetting to a 30-year low. Various industries, including car manufacturing, face an uphill battle as companies’ dollar and euro-denominated debt worsens due to Britain’s monetary collapse. The nation’s trade deficit is also set to expand, as the already high-consumption Britain is set to lose ready access to the EU market for its own goods and services. Various European financial institutions are also planning on relocating London offices to other European cities, such as Amsterdam.
Additionally, the United Kingdom itself could very well dissolve, leaving a diminished and economically anemic England. Scotland – which overwhelmingly voted to stay within the EU – may make another bid for independence. There are also stirrings in Northern Ireland for unification with Ireland, an EU member state. If both of these divisive political developments occurred, Britain would consist only of England and Wales – a mere shadow of Britain’s former self.
While the United States is in some ways affected by the general financial fallout of Brexit, the nation may actually stand to benefit. Economists are predicting that the U.S. real estate market may receive a boost as investors weary of the British economy flock to the United States. With this unexpected stimulus, there is also speculation that the Federal Reserve could forgo raising interest rates for a while longer to take advantage of this unplanned advantage (as well as to quell investor concerns over the general economic impact of Brexit).
As the United States’ trade deficit swings in its favor, with more money flowing into the comparably safer US markets, inflation rates may also shrink, increasing the buying power of US citizens.
This could have two positive implications for nonprofits: with larger financial institutions receiving an influx of investment, companies may be poised for more generous corporate giving; additionally, increased buying power for US citizens could encourage greater philanthropy, especially as low income individuals are already more predisposed to giving than other income brackets.
While increased expenditures on loans and mortgages may result in more savings for average consumers, there is yet one more factor that could lead to a successful year-end giving season: a consistently improving job market. Despite pessimistic outlooks, it appears that employment in the United States is likely to continue improving throughout 2016, according to McVean Trading & Investments LLC.
With a diminished unemployment rate, consumers emboldened by a more competitive dollar, and greater financial investment, nonprofits could see a particularly profitable year-end giving season. Even if the US populace looks toward saving during this momentary economic reprieve, that could still result in stronger giving in FY2017.
The Tap will continue to provide economic insight through the lens of today’s hottest issues for the benefit of fundraisers and nonprofit professionals.