Britons hit in pocket as pound nears euro parity
When UK businessman Paul Frampton bought the spending money for his family vacation to Tuscany this month, he was astonished to be charged almost a pound for each euro he bought.
"I was flabbergasted," said the 41-year-old media-company boss, who paid 97 pence per euro at London Stansted Airport and blamed work commitments for having to do the deal minutes before jumping on his flight.
Euro-sterling parity is a reality that wholesale traders, and Britons going abroad, are going to have to get used to as soon as next year if forecasts by HSBC and UBS are to be believed.
A one-for-one exchange rate would be a first for the pound. And even with an 11pc slide since the Brexit vote, the UK currency is still some way from its all-time low of 98.03 pence per euro at the height of 2008's global crisis.
The European Union buys about half of Britain's goods and services, and the June 23 decision to leave has hurt the pound by stirring concerns the nation will struggle to fund its record current-account deficit of 5.4pc of gross domestic product.
There are already signs investment is being hit, with Vodafone among companies considering moving their headquarters abroad.
On the other hand, a weaker currency makes the UK's exports more competitive - even as it hurts outbound tourists.
"Even before the referendum, it had become a question of, how does the current-account deficit decline?" said Themos Fiotakis, London-based co-head of currency and rates strategy at UBS, which is Switzerland's largest bank and this month reiterated its prediction for the pound to fall to parity with the euro in 2017. "The uncertainty resulting from the vote to leave is creating additional pressure."
The Bank of England's response - which has included an interest-rate cut and expansion of the money supply to soften Brexit's economic impact - has also hurt the UK currency.
The pound weakened last week as Prime Minister Theresa May's team was said to be leaning toward the first part of 2017 as the best moment to trigger the start of formal EU exit talks.
Mr Frampton, who also owns a property on Ibiza and regularly transfers money there from the UK, bought his last-minute euros at a TTT Moneycorp counter at Stansted Airport.
Moneycorp retail director Tracy Bownes said airport customers pay more because of higher operational costs. The company was charging about 99.85 pence per euro last Friday at Stansted. Bownes said the UK-based firm doesn't charge a commission and that, at some outlets, as many as half of its customers get more competitive rates by ordering online and collecting cash at the airport.
Exchange rates at some money changers have already gone above a pound, with operators at Stansted and nearby London Luton Airport having charged travelers about 101 pence per euro, according to a survey published on August 17 by Caxton FX. (Bloomberg)