The pound fell to a record low on Monday. It looks set to remain weak for a while after the new UK Chancellor’s mini-budget rocked investors last week.
That’s bad news for Britons in a range of positions – from homeowners paying off mortgages to those already struggling with the spiral energy costs (the most of us). But what does it mean for travelers looking to spend their hard-earned pound abroad?
Put simply, the fallen value of the pound means your money on things like food and drink won’t go as far as it used to accomodation.
Britons vacationing in America are particularly affected. The pound fell to a 37-year low of $1.0327 against the dollar on Monday after Chancellor Kwasi Kwarteng’s tax cuts rocked investors. Since then, it has recovered a bit to around $1.06 as of Wednesday morning.
In practical terms, tourists are now faced with an exchange rate of around £1 = $1, with one currency being worth around 20 per cent less than it was in October last year.
And it’s not just the people moving to the States whose purchasing power will fall. A number of other countries including winter favorite Barbados and host of the World Cup Qataralso anchor their currencies to the dollar.
But people are reluctant to abandon their holiday plans just because the pound has made some trips of its own.
A spokesman for ABTA (Association of British Travel Agents) told Euronews Travel: “After more than two years of severe travel restrictions, there is still significant pent-up demand for outbound travel. Over the years, clients have repeatedly told us that vacations are one of the last things they will cut back on when trying to ease the financial pressure on tight budgets.”
Whichever direction you’re traveling this fall or winter, here’s what you need to know.
How are airlines affected by the low pound?
A falling pound not only makes destinations more expensive, it could also mean a steeper flight ticket.
That’s because aviation fuel and aircraft leases are generally billed in US dollars, so non-US airlines have to pay more to refuel when their home currency falls.
However, it could be a while before airlines have to pass their higher costs on to passengers. easyjet CEO Johan Lundgren told the BBC that the low-cost airline is in a good position because it “secured‘, or bought some fuel in advance at a set price.
In the meantime Virgin Atlantic Chief Shai Weiss has been pushing PM Truss “to make difficult decisions to reverse the devaluation of the pound”.
The chief executive said Virgin could also weather the financial storm as it took precautions against a depreciated pound and rising fuel prices.
But he added: “We, like everyone else in the country, are concerned about the economic environment in which we currently operate,” reports Travel Weekly.
“The weakness of the pound is hurting the economy and consumers and fueling the inflationary cycle we are in.”
Where are the cheapest places for Brits to travel with the weak pound?
Despite the bleak economic outlook for the UK, it’s still possible to look for a cheaper holiday.
“There are ways customers can help secure the cost of their trip, such as booking ahead. If you are concerned about exchange rates, all inclusive Package tours are great hassle-free options and widely available in many destinations around the world,” advises ABTA.
“Even with the current exchange rate, many countries – especially around the Mediterranean Sea-where we do most of our stays abroad we offer our clients much better value for money holidays than in the UK.”
Turkey currently stands out as a cheaper travel destination. Although sterling is falling against the lira, it has appreciated at least significantly over the past year, from buying just under 12 lira to almost 20 per pound (a 64 per cent jump).
Argentina, Sri LankaHungary and Sweden also offer relatively cheap prices. As well as Japanwhich will reopen fully to tourists next month.
How are European travelers to the UK affected?
The euro is not doing so well either, touching a 20-year low against the dollar on Monday on fears over the deepening energy crisis in the region.
EU citizens can also see that their purchasing power is falling in the USA.
But they could take advantage of Britain’s misfortune to make cheaper deals in the UK. Typically expensive hotel rooms in London will look much more attractive to French holidaymakers, for example, as the pound is 0.9 against the euro versus an average of 1.14 in 2019.
Weiss adds that the downside to the devalued pound is that the UK is currently “on sale” for visitors new king at a fraction of the cost.
Although European tourists might prefer some scenic ‘Castles‘, sharpen and dramatic filming Locations.