Before the Referendum, Asda Money carried out a survey which showed that on average British families spend £1310 on their summer holidays, including spending money.
At the same time David Cameron was warning that a vote for Brexit could add £230 to that cost. He predicted that the pound could fall by 12%. Predictably, Leave campaigners claimed he was scaremongering.
Both were wrong. The cost of a family holiday has increased since June by almost £300, as a result of the pound falling by 16% against the dollar and by 23% against the euro.
Tim Farron has this to say:
For some families, this will make a holiday abroad unaffordable this year. This problem is not helped by the failure of Theresa May to say whether she wants Britain to remain in the Single Market or not.
I call on her to make clear that she thinks Britain should remain part of the world’s most lucrative market and not tie British industry up in endless red tape when it tries to export. Such an announcement will reassure markets. It will also help people who have worked hard all year enjoy a well-earned week or two in the sun.
* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.
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5 Comments
Hi Mary,
The figures I’ve just looked up for the two exchange rates are:
£1.00 = $1.47 & £1.00 = €1.30 (23rd June)
£1.00 = $1.29 & £1.00 = €1.15 (15th August)
which means a depreciation against the dollar of (1-1.29/1.47) x 100 = 12.2%
and against the euro of (1-1.15/1.30) x 100 = 11.5%
But there was spike in the value of the pound on the 23rd June. If we take a longer term average the depreciation is less.
The UK Govt can’t be responsible for any movement in the euro/dollar exchange rate so even if there was a large difference in the two movements there wouldn’t be any particular reason for concern.
But , as it happens, the two depreciations are very similar at about 12%. This raises the cost of anything bought in euros or dollars by 12×100/(100-12) = 13.6%
which works out at an extra £178.64 on a £1310 holiday.
Of course if we are planning an overseas holiday any fall in the value of the pound is bad news. On the other hand, if we were running a holiday business in the UK, or any other export business, it would be good news. The fall would make our businesses more competitive. So we shouldn’t just equate a high pound with economic success.
There is a link to the government’s deficit to the exchange rate. A higher exchange rate encourages us to holiday abroad and buy more imports than we sell exports. That deficit has to be funded by someone borrowing and in the longer term that borrowing can only be by the Government.
@petermartin2001 – as you point out the numbers do not work if we use June 23rd as the date of this comparison. However to be fair, last summer the pound was indeed worth about 23% more against the Euro than it is today. On July 17th 2015 the pound was trading at €1.44 compared with €1.15 today so you get 80% of the Euros for the same number of pounds. So that is the impact that summer tourists will see. I chose that date as it was the highest value the pound achieved throughout the summer – by August 10th it had dropped to €1.40 – which presumably is why it appears in the numbers being quoted above. But it is certainly not a fall “since June” as the article states.
Of course this is nothing new. For example On July 15th 2013 the pound was worth €1.15 – i.e. the exact same as today. Whereas by the following summer things had improved as the pound was worth €1.26 on 14th July 2014. Last summer was something of an outlier as the pound was worth €1.43 on July 13th 2015.
Based on the very high volatility indicates by the numbers above, exchange rate volatility is something that should come as no surprise to regular tourists to the Eurozone.
@Paul Murray, Yes I’d go along with the points you make. Currencies fluctuate all the time and it is good that they do. Greece and Spain wouldn’t have the economic problems they have if they were able to adjust the values of their currencies to make their economies more competitive.
Whatever we think of the so-called single market we have to recognise that even if we are out of it we can still trade according to WTO rules. Even if the worst comes to the worst, the tariffs involved will only be a few percent. The effect on trade will be much less than it’s been due to recent the 12% change in the exchange rate.
And those tariffs aren’t going to be payable to anyone else but ourselves and our European trading partners. They aren’t going to be a net loss to our economies.
The Pound was much higher around Christmas. The Brexit result was a surprise but this wasnt like 9-11, the fact that there would be a referendum was known a long time in advance. Unfortunately our trade policy is now in the hands of a trio who dont have a clue what they are doing.
Holiday in England, Wales, Scotland, Northern Ireland, the Channel Islands, the Isle of Man, or Gibraltar. Simples.
When you factor in £0 difference for holidays in the Sterling area, I think you’ll find the average increase per family is a lot lower.
Current rates against the Euro are about average or just above for 2008-2013 when at one point it went to 1.02. There was no talk of Brexit back then.