The post-Brexit pound – how sterling's fall affects you and the UK economy
The dramatic slide in sterling since the vote has given British holidaymakers enough pain already. But there was a further shock in store this week after some airports offered less than €1 to £1 at two major airports.
At Stansted and Luton, travellers found they could not even exchange £1 for €1, which at least prepared them for the financial squeeze at their destinations. Those holidaying in Europe are finding that meals, coffees, drinks and other items are typically at least 22% more expensive than a year ago.
There has, however, been a benefit for the British economy. On Thursday, that retail sales leapt 1.4% in July following a drop in June – apparently helped by an influx of big-spending overseas tourists from the likes of the US, China and Hong Kong.
Here are some of the consequences of the pound’s slump against the euro.
Foreign visitors to the UK
It’s not just London experiencing a surge in visitors exploiting the cheap pound, according to . It said there had been a surge in “close-in bookings” – those made six weeks before flying – from southern European travellers heading to Manchester, Liverpool, Leeds and Scotland, as well as the capital.
“For so long it has been, ‘I love going to London but it’s so expensive.’ Now it’s so much cheaper, we’ve seen a big increase in short-term bookings to London and regional UK,” said Kenny Jacobs, Ryanair’s chief marketing officer.
However, Ryanair’s biggest increase in business has come from Americans and Chinese flying to Europe and then using its network to come to Britain and shop. “We are carrying 20% more Americans this summer, and have seen a 10% increase in the number of Chinese coming into places such as Rome and Berlin, then using Ryanair to get around Europe. It is absolutely linked to the weakness of sterling.”
According to this week’s official retail sales data, purchases of watches and jewellery were up 16.6% on the year, a rise largely attributed to foreign buyers. For European and Chinese visitors, prices in British stores are now roughly 18% and 13% below mid-August 2015. For Americans it is around 16%, while for Australians everything is now a fifth cheaper.
Meanwhile, CAISSA Touristic, one of China’s leading tour operators, said that over the past two months it had seen a 20% increase in inquiries and bookings involving travel to the UK.
British tourists abroad
The weak pound has added hundreds of pounds to the cost of many people’s summer holidays. According to M&S Bank, the typical cost of a one-week overseas summer holiday for a family of four, including flights, accommodation, meals and spending money, had risen by £429 compared to last year due to the fall in sterling.
In Sorrento in southern Italy, the typical cost of a three-course evening meal for a British family of four, including a bottle of wine and soft drinks, has effectively risen by 22% in a year, with the bill around £86 this year compared with just under £71 a year ago, based on recent exchange rates. Corfu in Greece has recorded a similar percentage rise – from around £42 to £52.
Meanwhile, the typical cost of a glass of wine in a Sorrento bar has effectively leapt 53% in a year, from £1.41 (€2) in August 2015 to £2.16 (€2.50). These figures were provided by Post Office Travel Money, which publishes an annual family holiday report. It said bars and restaurants in several of the resorts surveyed had cut their prices to attract tourists.
Are the British swapping the Balearic Islands for the Isle of Wight? According to tourist authorities on the Isle of Wight, there has been a “very significant leap” in its website traffic, while Visit East Anglia said its enquiries had risen by a quarter.
But talk of a staycation boom may be premature. Ryanair said that it carried a record number of British holidaymakers to Europe in July, the first full month after the referendum.
“You are still getting a pint of lager for £1 in parts of Spain and Portugal, while you’ll struggle to find it anywhere under £2.50 in Britain,” said Jacobs at Ryanair. “When people like Nigel Farage say that Brexit will encourage Brits to holiday at home, he’s talking absolute nonsense. Since Brexit we’ve not seen any drop-off in business. If money is tight next year, people won’t stop going on holiday abroad – they will more likely drop down from a four-star hotel to a three-star.”
This may already be happening: the website TravelSupermarket said it was seeing a lot of interest in last-minute summer sun package holidays, particularly in the £300-£400 per person per week bracket. “We’re currently seeing all-inclusive four-star holidays to Turkey in early September for as little as £230 per person,” it added.
Bureaux de change
Researchers from currency specialist Caxton FX found that the Moneycorp exchange booth at Stansted airport was at one point offering just €0.9915 for each £1 exchanged. The rate on offer at the ICE (International Currency Exchange) bureaux de change at Luton airport was even lower at €0.9900.
suggested that holidaymakers travelling to Europe can expect to be around 7% better-off if they sort out their euros in advance rather than buying them at the airport. But checks carried out by the Guardian suggest the figure could be double that in some cases.
, which voted to stay in the EU, has at least benefited from the post-Brexit plunge in the pound. At the Quays shopping centre in Newry, just four miles from the border with the Republic, the fall in the pound is a huge relief following several tough years after the Irish economy tanked. This week, a sizeable proportion of the vehicles in its car park belonged to bargain-hunting shoppers up from the south.
Cathal Austin, the manager at Quays, said: “We have seen an increase since the pound has fallen, and we are expecting a much bigger increase for Halloween and Christmas.”