Tuesday, 4 October 2016

Holiday price gloom as £ hits 31 year low

With the £ sliding to a 31 year low against the US dollar today, who would be a tour operator just now? In the short term, as a phony war is fought over the shape of Brexit, advance purchases of foreign currencies will shield package holiday customers from the worst. Only once in their resorts will they feel the pinch. Independent travellers won’t suffer the full impact just yet either, assuming they fly with airlines that have bought fuel on the forward markets. Tourists with the clearest vision of things to come are those, like me, who have driven around Europe since the referendum vote and have already seen their holidays cost around 12%, after allowing for the constant of ferry or tunnel fares, because of the £’s fall against the euro. But there will come a point in the not too distant future when operators and airlines will be forced to raise prices and fares after accepting forward rates that reflect sterling’s weakness. Unless, unless…..the delusions currently besetting so many politicians in Government, that a so called hard Brexit can be achieved without long term damage to the economy and swept quickly away by an icy blast of reality. Only when the Government faces down the fantastists in Tory ranks and accepts that it will never be able to square the circle of barrier free trade with a ban on the free movement of people are currency traders likely to place renewed faith in the £. Of course, if you have savings in shares, higher holiday expenses may have been wiped out or at least offset by the rise in the FTSE 100. That rise has occurred mainly because it lists firms with heavy non sterling earnings that have benefited from the £’s slide. If you haven’t, trips abroad will soon consume more of your budget. And it could get worse yet.