The slump in sterling since Friday’s Chancellor’s Mini Budget is already hitting travelers hard – with the pound buying less than a euro or dollar at international currency exchanges.
Just before 8am on Monday morning, Change Group’s London office St Pancras International was selling €100 for £108.84 – valuing the pound at less than 92 euro cents.
The station is the hub for Eurostar trains to Paris, Lille, Brussels and Amsterdam.
Compared to pre-euro currencies, this rate is equivalent to 6.04 French francs for one pound.
While other currency exchange providers are offering slightly better rates, the fall in the value of the pound sterling to an all-time low against the US dollar will drive up costs for UK airlines and holiday businesses – and will reduce the purchasing power of British travellers.
The pound has fallen 5% against the euro since the Chancellor’s “mini-budget” on Friday. In early trading on Monday morning, the pound fell to just above $1.03 from $1.35 at the start of the year, a drop of almost a quarter.
The previous low, in 1985, was $1.05.
If the pound were to settle at the new level, the effect would be to make dollar purchases more expensive by a third in pounds.
Major aviation costs are denominated in dollars, especially fuel and aircraft rentals. Many airlines have part of their currency and fuel needs “hedged”: purchased in advance at a fixed rate.
But if the pound stays weak, carriers like British Airways, easyJet and Jet2 will face steep cost increases.
Johan Lundgren, chief executive of easyJet, said: “Clearly the dollar is very, very strong. We have a lot of spending in dollars and lotion income in pounds.
“But we are one of the best-covered airlines when it comes to fuel and currency. [foreign exchange]
“So it has less of an impact on us than on some other airlines.”
Holiday companies such as Tui also have large commitments in euros, for example for hotel rooms, staff costs and management costs in EU countries.
While many other countries are locking their currencies to the US dollar, the collapse of the British pound also marks a historic low against currencies ranging from the United Arab Emirates dirham to the East Caribbean dollar.
The fall in the pound, however, is making the UK cheaper for overseas visitors, which could boost the inbound tourism market.
At constant prices in sterling terms, a hotel room in London that cost an American tourist $200 at the start of 2022 now costs just $150.
The independent guide to holiday money