Why has the pound fallen, and what will it actually mean for households?
Sterling plunged to a record low against the US dollar early on Monday morning after a raft of tax cuts announced by the Chancellor and higher interest rates knocked international confidence in the currency.
Typically traders often buy into the dollar, due to its strength, during times of economic strife, which is why other currencies such as the euro and Japanese yen are also at their lowest against the dollar in decades. “That will result in a large amount of debt at a time when the Bank of England is going to be selling some of its holdings of UK government debt.”
This means that every £1,000 that a family spends will be worth £5 less simply because of the drop in sterling, and will leave the average household around £150 worse off every year. British firms that import parts or products from across the world will face more costly currency rates, which will particularly impact areas such as food, drink and technology, where price increases could then be passed on to consumers.For example, Paul Davies, chief executive at Carlsberg Marston’s Brewing Company, suggested the fall of the pound may cause a rise in beer prices for UK customers.
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