The collapse in sterling since the chancellor’s mini Budget on Friday is already hitting travellers hard – with the pound buying less than a euro or dollar at international bureaux de change.
Just before 8am on Monday morning, the Change Group office at London 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 with pre-euro currencies, that rate is equivalent to 6.04 French francs for each pound.
While other exchange providers are offering slightly better rates, the slump in the value of sterling to a record low against the US dollar will push up costs for UK airlines and holiday firms – and slash the spending power of British travellers.
The pound has fallen 5 per cent against the euro since the chancellor’s “mini Budget” on Friday. In early trading on Monday morning, sterling fell to just above $1.03, compared with $1.35 at the start of the year – a drop of almost a quarter.
The previous low, in 1985, was $1.05.
Were sterling to settle at the new level, the effect would be to make dollar purchases one-third more expensive in pounds.
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Key costs in aviation are denominated in dollars, in particular fuel and aircraft leases. Many airlines have some of their foreign exchange and fuel needs “hedged”: bought in advance at a set rate.
But if sterling remains low, carriers including British Airways, easyJet and Jet2 will face sharply increased costs.
Johan Lundgren, chief executive of easyJet, said: “Clearly the dollar is very, very strong. We have a lot of expenditure in dollars and a lotion revenue in pounds.
“But we’re one of the best hedged airlines when it comes to fuel and FX [foreign exchange]
“So it has less impact on us than it does on some other airlines.”
Holiday firms such as Tui also have large commitments in euros, for example for hotel rooms, staff costs and handling charges in EU countries.
With many other nations locking their currency to the US dollar, the collapse of sterling also marks an all-time low against currencies from the UAE dirham to the East Caribbean dollar.
The slump in sterling, though, makes the UK cheaper for overseas visitors – potentially boosting the inbound tourism market.
At constant sterling prices, a London hotel room that cost an American tourist $200 at the start of 2022 is now only $150.