Sterling is testing new lows in foreign exchange markets, with a pound buying just €1.10 and $1.21, or nearly a fifth less than the rate just before the EU referendum vote. Who are the losers and the winners in sterling’s plunge?
Losers
Drivers: Expect a surge in petrol prices in the next fortnight towards 120p a litre as motorists are hit by the double whammy of a fall in the pound and a rise in the price of crude on world markets, which are traded in dollars. “Motorists can expect increases of up to 4p or 5p per litre by the end of the month,” said the Petrol Retailers Association.
Retailers: The sharp drop in the pound raises the prices retailers pay for imports, with the British Retail Consortium warning that shops face a challenging time. But, so far, there is little hard evidence of price rises; mysupermarket.com said the average cost of groceries fell again in September, and are 3% cheaper than this time last year.
Holidaymakers: HSBC reckons the pound will hit parity against the euro, but for some holidaymakers that is already reality. Airport bureaux de change are offering tourists less than €1 for each £1 – just 97 cents in some cases. Fortunately, few British tourists head abroad at this time of the year, although it’s downhill for ski operators with prices in Alpine resorts 20% higher than this time last year, and even more in the Rockies.
Overseas pensioners: About a third of the 300,000 Brits living in Spain (and similar numbers who have retired to Ireland) draw a UK pension, whose spending power is shrivelling day by day. The £119.30 a week basic state pension was worth as much as €170 a week last year, but is now worth just €131.80 a week.
Winners
Stock market investors: The FTSE 100 is up 22% since the lows in the immediate aftermath of the referendum result, boosting the value of pension pots and investment Isas. The biggest risers have been commodity stocks, such as BHP Billiton and Anglo American, which make most of their profits in dollars, which are now much higher when translated into sterling.
Exporters: Britain has the worst balance of payments deficit of any major economy, and the falling pound will make British-made goods much cheaper abroad. But the impact is slow; the UK’s trade deficit in goods and services with the rest of the world widened in August as exports continued to rise but imports grew at a faster rate.
Foreign property buyers: According to Juwai, which claims to be the biggest international property website for Chinese investors, inquiries were up 12% in August to a record high as the renminbi-rich scout around for bargain buys in London.
