Expats feeling the pinch of weaker pound?

Marbella, Spain

British expats may feel the pinch this year, after the pound has weakened in the wake of the UK’s Brexit vote.

The pound lost at least a fifth of its value against nine currencies in 2016, according to research from Lloyds Private Banking. Greater economic uncertainty since the referendum’s result has contributed to the pound declining in value, reveals the lender’s report, with the pound falling against 56 of the 60 currencies analysed.

This followed a good year for the pound in 2015 when sterling gained in value against more than three-quarters of the currencies surveyed. Overall, the pound has fallen by 11 per cent against a trade-weighted basket of currencies over the past two years. Indeed, sterling made significant gains against just two currencies in 2016: the Egyptian pound and the Mozambique metical.

The rise against the Egyptian currency largely resulted from the Egyptian government’s decision to float its currency in November. This was part of a number of reforms aimed at strengthening confidence in the Egyptian economy. Sterling is largely unchanged compared with a year ago against the Turkish lira (+0.3 per cent), the Danish krone (0.0 per cent) and the Mexican peso (-0.2 per cent).

The pound lost at least a fifth of its value against nine major currencies. The biggest declines were against the Brazilian real (-28.4 per cent), Russian rouble (-28.0 per cent) and the Icelandic krona (-27.9 per cent).

The Brazilian real was notably one of the currencies the pound rose most against in 2015. Overall, the pound is largely unchanged against the Brazilian real compared to two years’ ago.

Peter Reid, Expatriate Banking Director at Lloyds Private Banking, comments: “The pound’s decline is bad news for British holidaymakers, with most destinations becoming more expensive in 2016. Many British expats will also be feeling the pinch; those with incomes in Sterling such as pensioners are getting fewer pounds when converting their money.”

However, British expats living and working abroad and earning in foreign currencies are now getting more pounds for their money and they are seeing their spending power surge when they head back to the UK, notes Lloyds.