We’ve all lost money in this post-Brexit collapse of the pound. Everyone’s wages have suffered a deep cut in value. Savings the same. In fact all forms of money in sterling is worth less after the currency fell to a 31-year low against the dollar and three-year low against the euro.
The sad fact is that the pound’s purchasing power is diminished and can buy fewer euros, dollars and yen. At 5pm (London time) on 5 July the pound was sliding to $1.30, well down from $1.57 last August.
The pounds buys 132 yen when a year ago it could buy 193. Against the euro, the pound has fallen from just below €1.45 registered in 2015 to below €1.20 today.
This affects the cost of your foreign holiday. It also pushes up the cost of goods and services in the UK. Unless the goods and services are entirely made in Britain, they will cost more. And that means most things will go up in price because it is difficult to find things that are not either made abroad or have some element made overseas.
Consumers will get a shock. Inflation has stayed near zero for the most of the last two years, boosting the real value of relatively modest average wage rises. For many, higher inflation and static wages means no increase in real incomes or even a fall.
It’s clear that a country running an annual deficit with the rest of the world of 7% is living beyond its means. If it cannot export more to close the gap then it needs to make imports more expensive to discourage their purchase, to bring the income and expenditure of the country back into balance.
But it’s a painful process and is likely to annoy a nation already bracing itself for a post-Brexit recession.
