Brexit plans are steaming ahead, with the Prime Minister adamant that the UK will leave the EU on 31 October. With the government currently in talks over a proposed deal, many Britons are fearful of how the outcome may affect their lives, and in particular, their holidays. With half-term just a week away, people up and down the country are preparing to jet off to warmer climates. However, the outcome of political discussions could cost travellers in the form of their international currency.
Brexit discussions have resulted in extreme turbulence for the exchange rate, with the pound soaring and plummeting against international currency rapidly. Largely this has been dependant on the promise of a deal and the threat of a no-deal. At the time of writing the UK Parliament is battling it out to decide whether Boris Johnson’s latest deal will be agreed upon. However, with uncertainty still rife, travellers set to fly next week are uncertain of how Brexit will affectnew their currency.
Luckily, international money expert Ian Stafford-Taylor of Equals, formerly known as FairFX, has shared the facts about some of the UK’s most prominent financial fears.
He said: “We’re down to the wire now, and with less than two weeks to go until the UK is set to leave the EU, our Brexit Support Desk has seen a rapid increase in the number of queries we are getting from customers worried about the impact of Brexit on their travel money and international payments.”
“The closer we get to leaving the EU, the more heightened anxiety there is around the consequences it may or may not have.”
“We’ve seen spikes in support requests whenever there is a vote or update on the UK’s negotiations with the EU, and as we await a vote on the Prime Minister’s new deal, we’re likely to see requests soar as customers try to understand what it will mean for the value of the pound.”
Ian explained that although the pound has experienced vast volatility over the last few months, it has not managed to regain the strength it had against the euro since before the referendum. He points out this has negatively impacted holidaymakers heading for the continent
“If the Prime Minister’s deal is rejected and the UK leaves the EU without a deal it is possible we could see the pound fall,” he explained.
“In terms of what that looks like for exchange rates, we could see the pound dip back below 1.10 against the euro, and head towards the low 1.20s against the US dollar. We’ve seen these low rates a handful of times during the course of the Brexit negotiations over the last three years, but before that, we had not seen rates that low since 2009 following the financial crash.”
However, he does point out that there is good news in store if MP’s decide to vote in favour of Johnson’s proposed deal.
“If the Prime Minister is able to rally the votes of MPs on his new deal with the EU it is possible that the pound will strengthen.
“If MPs vote in favour of the deal, it means we move away from a lot of the uncertainty surrounding Brexit and that is more likely to have a positive impact on the pound than a no-deal scenario.”
“The market initially reacted well when Boris Johnson’s new deal was announced, but whether that lasts will depend on how MPs vote.”
So, what does this mean for travellers heading off to Europe?
“In the last month alone we’ve seen the pound fluctuate 5 per cent against the euro including a five-month high in October, so it’s been a rollercoaster journey, to say the least,” says Ian.
“As part of a wider analysis we recently found that if you bought currency when rates were at their lowest so far in 2019 compared to when rates were at the highest, the nation would have collectively lost £3.8 billion (that’s around €123 each for every £1,100 exchanged) just by exchanging currency on the ‘wrong’ day.
“The safest way to guarantee getting an exchange rate you’re happy with is to lock-in the rate on a prepaid card when the pound is doing well. It also means you avoid losing money when you return from your trip and have to change any leftover cash back into pounds if the exchange rate has worsened.”
Similarly, other currencies may be impacted too, so it is important to keep an eye on rates and stay up to date with relevant news.
Ian continues: “The best way to protect yourself and your money against the impact of Brexit is to lock in your currency requirements as soon as exchange rates reach a level you’re happy with.
“It’s all relative, so don’t expect the pound to rocket back to pre-referendum rates, but if the rate on offer is good considering the current circumstances, locking in is a sensible option.”
“There’s still so much uncertainty surrounding Brexit and it’s very easy for the rates to move against you, so staying alert to the news agenda and the pound’s movements will help you act fast and get more for your money.”
Travellers should also be aware of how much they are changing, and whether this much money will be used up by the end of the trip.
“We’ve found that on average people return from holiday with around £177 worth of leftover currency. If it’s on a prepaid card that’s fine, you can save it for future trips or switch to a different currency, but if that’s in cash you’re left at the mercy of buy-back rates which might not be in your favour,” Ian states.
“If you have any leftover travel cash and want to reduce the risk of being left with currency being worth less than it was, it’s always prudent to change your money back sooner rather later as it’s impossible to know what the future holds – particularly when it comes to Brexit.”
