Here’s what you need to know
It seems like every day brings more news on the various adverse effects that Britain’s exit from the European Union will cause. The crashing value of the Pound, which is down by more than 25 per cent against the Euro since the referendum of June 24, is the root cause of many of these.
One of the subtler results of the dropping value of the Pound is manifesting in more expensive trips to the supermarket for British families. Whether you shop at Waitrose or Aldi, it’s undeniable that a great deal of produce stocked in our supermarkets is from abroad – and particularly Europe.
Exchanging £1 for Euro currency using the mid-market exchange rate (what you see on Google and xe.com) between the Pound and the Euro is approximately €1.09, while before the referendum it was a relatively lofty €1.34. In real terms, that means that every Pound spent is worth €0.25 less than before – and when you are talking about larger sums of money, stockists are really feeling the pinch, and this is reflected in higher prices (except at Tesco).
More expensive holidays:
Probably the most overt and obvious effect of the Pound dropping in value, at least for the majority of people who don’t operate in the financial sector, is how much foreign currency it is possible to buy with your Pounds before going on holiday. There was a time, not so long ago, when £1 would get you enough in Euros for a pint on the Costa del Sol (maybe two if it’s happy hour) – but now it is not the case.
It may even become more expensive to play online casino games as you lie on the sun-soaked beach of your choice, once the full effect of Brexit has been felt. Many of the best online casinos UK players have to choose from are in fact headquartered in the EU – particularly countries such as Malta which offers beneficial tax rates – and offer their bonuses at the same value in each currency (i.e. £/$/€100). This means that the bonuses you get for signing up are less valuable than before.
Bonus: How to mitigate expensive exchanges:
One way that holidaymakers can mitigate the damage caused by the dropping value of the Pound is to exchange their money through less conventional methods. While the bureaux de change at the Post Office and M&S are popular, they both lose out in terms of value because the rate they use is typically a few cents below the mid-market rate, plus sometimes add a commission.
While this doesn’t sound like much, it can certainly add up, especially since you are likely to spend hundreds of Euros/Dollars/etc on a single trip. The bureaux at airports are even worse; some reports have shown them giving less than €1 for £1 despite the rate being approximately €1.09. However, you can find some great prepaid/credit cards to spend on while you travel at MoneySavingExpert – these typically use the mid-market rate or something close to it, and commissions/fees are minimal.
Expats and retirees suffering:
The final effect of the falling Pound we will discuss in this article is the one it is having on those British people who have chosen to make their lives in other countries. If you are earning a salary, or collecting a pension, and it is based in Pounds, then getting by on that money becomes more difficult when living abroad.
For example, a retiree collecting a pension of £200 per week while living in France would have been able to get around €265 after exchanging it before the referendum, whereas now it would be closer to €209 – a €56 difference, which over an entire year would equate to nearly €3000.
Not to mention, the costs of transferring money abroad using traditional bank transfers is extraordinarily high. Like bureaux de change, banks use a rate that is three to four cents lower than the mid-market rate, and can sometimes charge as many as four separate fees for you to access your money. Savvy expats and retirees have begun using Transferwise.com for this instead, which uses the best mid-market rate, and charges only a very small commission (0.5-2 per cent depending on the amount sent).
It remains to be seen whether the Pound continues to drop against the Euro in the wake of Brexit. Against the dollar at least, it has begun to see some resurgence, although this can perhaps be attributed to the USA’s own problems, rather than our successes. Brits can only hope that the effects of their currency’s volatility are relatively short-lived and that the drops caused by Brexit will reverse in due course.