Pound sinks to new record as sterling nears parity with the euro



The run on the pound continued today as sterling headed towards parity with the euro.

Sterling slumped nearly a cent against the single currency to a new all-time low of €1.1126 before recovering slightly to €1.1156.



The pound was buying even less at the tourist rate with holidaymakers able to buy little more than €1 with £1 at bureaux de change.

Sterling has crashed by more than 25 per cent over the last 18 months and more than 12 per cent since September on fears over the state of the UK economy.

The number of families choosing to holiday in Britain - such as Scarborough - could soar by at least one million as a result of the weak pound

It is bad news for those heading to the continent this winter with everything from hotel rooms in Paris to ski passes in the Alps far more expensive than a year ago.

Investors are dumping the pound in favour of the euro on signs the UK recession will be longer and deeper than on the continent. The euro was trading at 89.01p.



With sterling slumping to another new low against the euro, the number of families choosing to holiday in Britain next year could soar by at least a million.

Holiday operators said self-catering breaks, holiday parks, boat holidays and country lodges on home soil were all proving popular as families already hit by the credit crunch call time on breaks abroad.



Bookings for cheaper local trips such as holiday parks are on the increase

A spokesman for Hoseasons, the UK’s biggest self-catering holiday operator, said it was seeing a rise in the number of families choosing to stay close to home.



‘Next year’s bookings are up 15 per cent on this time last year,’ he said. We don’t think people will stop going on holiday, but they are being more careful about the kind of holiday they choose.



‘They might have one holiday break in the UK where they can manage their budget more easily than they can abroad.

‘It also means people are spending their money in the UK, which is helping our economy.’



Naomi Woodstock, of holiday park company Haven, said destinations such as Great Yarmouth and Scarborough were proving popular.



‘We are 10 per cent up on advance bookings for next year,’ she said.

One-for-one: There are fears the pound could soon hit parity with the euro

‘The fact that people now get fewer euros for their money is definitely a consideration.’



Sian Brenchley, a spokesman for VisitBritain, said: ‘We have found that the economic situation is making people take another look at holidays at home.



‘We have still got the bucket-and-spade aspect but we have expanded to be so much more, with the regeneration of seaside areas and cities that can rival overseas destinations.’

Quenton Fyfe, of website AboutBritain.com, said that while overall booking levels were down year-on-year because of the credit crunch, there had also been signs of an increase in European visitors to the UK.



‘It is better value for people from the eurozone than it has been so it is bound to make us a more attractive holiday destination,’ he said.

Although the pound gained one cent against the U.S. dollar yesterday, reaching $1.49, the fall against the euro means sterling is now the weakest it has ever been against that currency since it was launched in 1999.

Yesterday, customers changing £200 at Birmingham Airport got only 199 euros after charges – less than one euro to the pound.



Stephen Heath, from the internet-based foreign exchange business FairFX.com, said: ‘It’s probably only a matter of time before the pound weakens to a point of currency exchange rate parity with the euro.’

In recent years, Britons have headed to the US to snap up cheap gifts thanks to the good exchange rate but the tables have now turned.

Store bosses say Americans are coming to London in numbers not seen since before 9/11.

Up to 10million overseas visitors are expected to shop in London in the run-up to Christmas, helping to offset the downturn in spending by hard-pressed Britons.

Beverley Aspinall, managing director fo Fortnum & Mason in London, said: 'The strength of the euro has made a huge difference. Last weekend was really phenomenal.

'More than 70 per cent of the customers in our restaurants were Europeans. And when they come they don't just sit down with a salad. They have a starter, a main, a pudding and a bottle of wine. It's great.'

Draw: Tourists are flocking to London's famous stores such as Harrods, above, to take advantage of the plunging value of the pound

Spending by Americans is up more than 20 per cent on last year but the biggest increase was among visitors from the UAE with a 100 per cent rise, she said.

At Selfridges in Oxford Street spending by Americans is running at 50 to 60 per cent above last year's levels, while French customers are 30 per cent more lavish.

Its own research found that almost 90 per cent of fashion items are now cheaper in the West End than in equivalent stores in Paris, Milan and New York.

The only major nationality to be less in evidence this Christmas is the Russians, whose money helped fuel a boom in 2006 and last year.

Jace Tyrell, spokesman for the New West End Company, which represents traders in Oxford Street, Bond Street and Regent Street, said: 'It seems a lot of them have gone home.'

Estate agents say wealthy foreign investors are also taking advantage of the weaker pound to pick up bargains.

Trevor Abrahamson, of Glentree International, said he had had three enquiries from purchasers with budgets of up to £40 million in the past two weeks.



