It has been four months since 51.9 per cent of the population voted to leave the EU. As we all expected, the pound dropped considerably immediately after the announcement was made. But, now the dust has somewhat settled and Theresa May has stated that Article 50 will be invoked by the end of March 2017, what is happening with the pound post-Brexit? We take a look below.
Since the Brexit vote at the end of June, the pound has fallen dramatically. When Theresa May announced her intentions to start formal Brexit negotiations by the close of spring, it declined to the lowest it has been in three years. A year ago the pound was worth €1.35. On October 13th, against the euro, it was worth roughly €1.10. The outlook is even bleaker against the dollar. A pound was only worth $1.22 on October 13th. This means that it has fallen by approximately 18 per cent, and we have not seen levels as bad as this for 31 years.
Many thought that the pound would start to pick up again after the initial impact of the decision to leave the EU. However, the economic stimulus measures put in place by the Bank of England and the cut in interest rates have only accentuated the currency’s continuing weakness.
So, what impact has the falling pound had? Well, on a positive side, it does help exporters, and, therefore, a lot of British businesses are benefiting. On the flip side, this makes it difficult for manufacturers that import stock, as they are now facing increased costs.
Marmite fans may have also been worried about another downside of the pound falling. This is because there was a standoff between Tesco and Unilever, which is their biggest supplier. Unilever wanted to increase their prices in the UK as a result of the drop in value, but the UK supermarket chain was having none of it. Tesco removed Marmite and other popular brands, including Ben & Jerry’s ice cream, from its online store, but, thankfully for most, the dispute has now been settled.
Foreign holidays have also become a lot more expensive for British tourists. But, there is always a positive with a negative, and this is the fact that our own tourism sector here in the UK has benefitted. Britain is now a cheaper destination for overseas tourists, making it an attractive holiday destination. In fact, after the vote, flight bookings to the United Kingdom increased by just over seven per cent according to travel analytics business ForwardKeys. Other firms have backed this research up. Irish airline Ryanair has said that more overseas visitors have been travelling to Scotland, Leeds, Liverpool, Manchester, and London. Caissa Touristic, a tourism operator that specialises in travel from China to Europe, has experienced a 20 per cent rise in bookings and enquiries to the UK this summer compared with 2015.
As you can see, the fallout for Brexit continues, and the pound is still suffering. But, it is not all doom and gloom and four months is a short time frame, and we will continue to monitor the situation to see what occurs.
