The pound dropped to a record low on Monday. It looks set to stay weak for a while after the new UK Chancellor’s mini-budget shook investors last week.
That’s bad news for Brits in a range of positions - from homeowners paying off mortgages, to those already struggling with spiralling energy costs (most of us). But what does it mean for travellers wanting to spend their hard-earned sterling abroad?
Put simply, the fallen value of the pound means your money won’t stretch as far as before on things like meals out and accommodation.
Brits holidaying in America will be particularly affected. The pound slumped to a 37-year low $1.0327 against the dollar on Monday after Chancellor Kwasi Kwarteng’s slew of tax cuts rattled investors. It has since rebounded a little bit to around $1.06 as of Wednesday morning.
Practically speaking, tourists are now facing an exchange rate of roughly £1 = $1, with a currency worth around 20 per cent less than it was last October.
And it’s not just people heading State-side who will see their spending power reduced. A number of other countries, including winter favourite Barbados and football World Cup Host Qatar, also anchor their currencies to the dollar.
But people are reluctant to give up their holiday plans just because the pound’s been on some travels of its own.
An ABTA (Association of British Travel Agents) spokesperson tells Euronews Travel, “There is still considerable pent up demand for overseas travel after over two years of severe travel restrictions. Over the years, customers have repeatedly told us that holidays are one of the last things they will cut back on when looking to ease financial pressures on hard pressed budgets.”
So whichever direction you’re travelling in this autumn or winter, here’s what you need to know.
How are airlines impacted by the low pound?
A plummeting pound doesn’t just make destinations more expensive, it could mean a steeper plane ticket too.
That’s because aviation fuel and aircraft leases are generally priced in US dollars, so airlines outside the US have to pay more to refuel when their home currency falls.
It could be a while before airlines need to pass their higher costs onto passengers, however. EasyJet CEO Johan Lundgren told the BBC that the budget airline is in a good position because it had “hedged”, or bought some fuel in advance at a set rate.
The chief executive said Virgin could also weather the financial storm, having taken precautions against a devalued pound and rising fuel prices.
But, he added, “We are concerned, like everyone else in the country, about the economic environment in which we are operating right now,” Travel Weekly reports.
“The weakness of the pound is hurting the economy and it’s hurting consumers and it’s fuelling the inflationary vicious cycle we are in.”
Where are the cheapest places for Brits to travel on the weak pound?
Despite the bleak economic outlook for Britain, it’s still possible to shop around for a cheaper holiday.
“There are ways that customers can help safeguard the cost of their trip, such as booking early. If they are concerned about exchange rates, all-inclusive package holidays are great stress-free options, and they are widely available in many destinations around the world,” ABTA advises.
“Even with the current exchange rate, many countries - particularly around the Mediterranean, where we take the majority of our overseas breaks - offer customers much better value holidays than in the UK.”
Turkey stands out as a cheaper destination right now. Though sterling is falling against the lira, it has at least strengthened significantly over the last year, from buying just under 12 lira to nearly 20 per pound (a 64 per cent leap).
How are European travellers to the UK impacted?
The euro isn’t doing so well either, touching a 20-year low against the dollar on Monday over fears around the region’s deepening energy crisis.
So EU citizens may also notice their spending power reduced in the US.
But they could take advantage of the UK’s misfortunes to get some cheaper deals in Britain. Typically pricey hotel rooms in London will look a lot more attractive to French holidaymakers, for example, with the pound sitting at 0.9 to the euro versus an average of 1.14 in 2019.
Weiss adds that the flip side of the devalued pound is that the UK is currently “on sale” for people who want to come to visit the new king at a fraction of the cost.