Q&A: Why UK bank account closures could hit the most vulnerable Britons living in Spain

In the wake of news that some UK banks are closing accounts for their British customers living abroad, we spoke to an international money management specialist about the likely impact on Brits living in the EU.

Q&A: Why UK bank account closures could hit the most vulnerable Britons living in Spain
Photo by Nick Pampoukidis on Unsplash

As the British government has so far failed to secure access to the EU banking scheme – known as passporting – after Brexit, UK banks are faced with complicated processes to gain financial licences with each of the EU's 27 member states.

And it seems that for some this is just not worth the effort – leading to British people living around Europe getting letters saying their accounts would be closed or their credit cards withdrawn.

It's important to stress that this is not all British banks, and not all types of account are affected. The situation is different in each country – click here to see the bank-by-bank list of changes for British people living in Spain.

But for those people who do face losing their accounts, the consequences could be serious – especially for people living on low incomes in Spain who already face the anxiety of whether they have sufficient resources to qualify for residency.

READ ALSO Brexit: How much money will Britons in Spain need to be legally resident?

A steep drop in the value of the pound against the euro means that those who rely on UK pensions or rental income from UK properties have already been hard hit, with some people losing up to 10 percent of their income – and it is just those people who could by worst affected by the latest changes.

Jason Porter, a specialist in international tax and money management at BlevinsFranks Financial management, explains why.

What do Britons living in the EU need UK bank accounts for?

For many people, they just keep a UK account from habit or convenience, maybe to use as spending money when they come back to visit the UK. And for those people it is really just a bit of inconvenience to change over any direct debits to their main account in the country where they live.

But for others it could have more serious consequences if they are using their UK account for regular income – in particular for pensions to be paid into or income from UK rental property.

READ MORE:  The hidden costs of having a Spanish bank account

Photo: AFP


What's the problem with pensions?

State pensions can be paid overseas, so you can get your pension paid directly into your European account in euros, but not all private pensions have the capability to do this.

It's mainly the smaller pension funds, I'd say 90 percent of private pensions can pay overseas, but not all can so if you don't have a UK account this could be a problem.

And what about income from rental properties?

If your rental income cannot be paid into a UK account then you have two main options – have the money paid into your European account and pay international transfer costs each month – these are a lot less than they used to be as everything becomes computerised, but would still add up over time. Or you could hire a UK management agent who would collect and transfer the money for you – but they will charge you a fee to do this, often 10 percent or more of your monthly rental income.

The other option is to become incorporated and set yourself up as a property company, with a business account in the UK. If you have multiple properties and you're having income sent to a personal foreign account every month you may find the bank begins to question what you are using the account for.

Some people just keep a UK property or properties as an investment, but for others rental income from a UK property can form the bulk of their income in Spain.




So what are the options if your bank is closing your account?

Most British people living in the EU will already have a bank account in the country where they live so you need to transfer all the payments, direct debits etc that you can to this account.

It's important to point out that this is happening quickly – account closures are likely to take place in November and some people get just a couple of weeks notice. You need to go back through your bank statements for the last few months and make a note of all payments so you can transfer them to your EU account and avoid missing payments and getting hit with charges when your UK account closes.

For those who cannot use their European account for everything there are international accounts and 'expat' accounts, but these often require a minimum deposit level. Similarly there are 'international' credit cards to replace something like a Barclaycard, but again these are often limited to high net worth accounts.

One option that could be worth exploring is Isle of Man accounts – these are sterling accounts but often operate in Europe so already have the European licences that they need.

Photo: AFP


Is this happening just because of Brexit?

Partially. The specific issue with European banking licences is because of Brexit, but many British banks had been withdrawing from Europe and selling their European operations. If, for example, Barclays had a presence in France it would be able to carry on offering accounts to British people in Spain without needing to get extra licences, because it had an EU base that it could have passported from. But as many banks have withdrawn from the European markets they no longer have these options.

Who do you think will be the hardest-hit by this?

Unfortunately I think it will be the people who don't have a high net worth, aren't very financially savvy and maybe don't speak the language of the country they live in very well who will be impacted by this.

People with a high net worth will be able to find international accounts or expat accounts and those who are financially savvy and fluent in the local language should be able to open sterling accounts with their local banks.

Unfortunately for pensioners and those on low incomes this could be more difficult and those who are already on the margins for having sufficient resources to gain residency status in Spain could be hard hit. For example, having to pay extra bank charges or management fees on rental income could bring them below the income threshold they need to gain residency status in France, if they were a borderline case anyway.

Jason Porter is Business Development Director of Blevins Franks Financial Management Ltd.


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Liz Truss: What does the new UK PM mean for Brits in Spain?

Following the announcement that Liz Truss will replace Boris Johnson as the UK’s new Prime Minister, political correspondent Conor Faulkner analyses what this could mean for Brexit and the 400,000 UK nationals who reside in Spain.

Liz Truss: What does the new UK PM mean for Brits in Spain?

On Monday September 5th, it was announced that members of UK’s Conservative party had finally elected a new leader and thus a new Prime Minister, after Boris Johnson was forced to resign at the start of the summer.

Beating rival Rishi Sunak with 57 percent of the vote, just 80,000 Conservative party members elected the former Foreign Secretary as Prime Minister of the United Kingdom and Northern Ireland.

READ ALSO: ‘Iron weathercock’ – Europe reacts to Liz Truss becoming new UK PM

But what, if anything, does her election mean for Brexit and the 400,000 Britons living in Spain? 

Will she be a continuity politician or will she forge a new path (for better or worse) in British-European relations?

Truss the Remainer

During the 2016 EU referendum campaign, Liz Truss campaigned for Remain. “I don’t want my daughters to live in a world where they have to apply for a visa to work in Europe,” she famously said.

Having once been a member of the Liberal Democrats and decidedly more pro-European, Truss’s conversion to Euroscepticism came after she had voted Remain in the EU in the June 2016 referendum.

Did the much hallowed Brexit benefits become clear to her in the aftermath of the result? Possibly. Or, as Brexit became a litmus test of loyalty and Conservatism, did her position shift to fit the intra-party politics of her party?

Although one may hope that her former pro-European positions might mean a softening in UK-EU relations in the post-Johnson era, Truss’s dependence on the Eurosceptic wing of the Conservative parliamentary party during her leadership campaign suggests she may be kneecapped in her ability to strike compromises with the EU.

Truss the Foreign Secretary

Owing to Truss’s tendency to be a bit of a political flip-flopper and change her positions at the whim of career progression, it is therefore quite difficult to predict her future behaviour with regards to Spain. We can, however, make some educated guesses based on her time as Foreign Secretary.

Going off her tenure in the Foreign Office, it seems Truss may view relations with Spain more positively than perhaps with other EU member states or the block as a whole.

In December 2021, Truss travelled to Madrid to meet with her then counterpart José Manuel Albares to build “closer economic, tech and security ties” with Spain, and to “support” the 400,000 Britons living in Spain. 

“We’re significant trading partners, with the UK as Spain’s biggest European investor,” she said, “and the UK as the top destination for Spanish investment. By boosting our trading ties even further, both Spain and every region and nation of the UK will benefit.”

Yet, Truss has also strongly hinted that she would be willing to overhaul Article 16 and put the Northern Ireland protocol at risk. If she is willing to jeopardise peace and potentially break international law to appease her political base in England, particularly within her own parliamentary party, one must wonder about the seriousness with which a few hundred thousand Brits up and down Spain’s costas will be taken. 

Reaction in Spain

Spain’s leading newspaper El País believes Truss will continue the populist strategy of Johnson. Truss was, even in her acceptance speech on Monday, loyal to her predecessor. 

She “promises citizens a rose-tinted future, without clarifying how she intends to achieve it”, the paper believes.

Sue Wilson, Chair of Bremain in Spain, told The Local that she expects Truss to “carry on with the policies of Johnson, and be led, presumably, by the same right-wing forces of the Conservative Party.

“I suspect that, as far as what affects British citizens in Spain, that continuity will simply mean we remain invisible and left to our own devices,” Wilson added.

“Britons in Spain have been left in bureaucratic limbo since the Brexit vote six years ago. Whether it be the ongoing confusion over driving licenses or renewing residency or getting new TIE cards, many Britons abroad have felt abandoned by the UK government.”

Wilson and other members of Bremain in Spain will take part in the National Rejoin March in London on Saturday September 10th to “deliver a warning to the new PM about the impact of Brexit on the spiralling cost of living crisis in the UK”,  to express a “clear and loud message” that “Brexit has failed” and to promote “Rejoin the EU” as a “mainstream” call to action.

“For six years now, Brits living in Europe have been dealing with fear, uncertainty and stress, thanks to Brexit. We have already lost important rights, and many are concerned that even those secured could be at risk. Truss plans to proceed with the Protocol Bill which threatens the legally binding international treaty that secured those limited rights. In the process, she seems determined to do further damage to UK/EU relations and our international reputation.”

Anne Hernández, head of Brexpats in Spain, told The Local Spain: “Our problem as Brits in Spain might be if she actually applies Article 16, meaning a no deal Brexit, and she has threatened that. Although I’m not sure how that might affect our rights.”

The overriding feeling among UK nationals in Spain about Truss in No. 10 is the feeling of trepidation that Hernández describes.

With its fourth leader in six years and the third to take the helm of Britain in the post-Brexit world, for Brits abroad Truss’ rise to Downing Street has prolonged that uncertainty. 

With her apparent willingness to simply tear up internationally binding agreements, many will worry if the situation in Spain will be taken back to square one.

One would hope that her previously positive interactions with the Spanish state could mean that she lends a hand in resolving some of these lingering administrative issues affecting Britons in Spain, but the propensity to change her politics when it suits her make this unpredictable, and her reliance on Eurosceptic forces within her party make it unlikely.

How about Gibraltar?

This unpredictability could be of particular concern for UK nationals in Gibraltar. After voting Remain by a whopping 96 percent, the tiny British territory was not included in the main Brexit deal that came into effect from January 2021, and complicated multilateral negotiations between Gibraltar, London, Madrid and Brussels have rumbled on without resolution. 

Truss’ rhetoric on Gibraltar during her tenure as Foreign Secretary was as combative as her anti-EU talking points during the Tory leadership campaign, continuing the us-against-them language: “We will continue to defend the sovereignty of Gibraltar.”