BRITISH holidaymakers are faced with deepening financial woes as the pound is in line to reach parity with the euro and obliterate the spending power of UK tourists in some of Europe’s leading destinations.
The pound is currently trading at 1.09 euro after collapsing from 1.31 euro the day before Britain voted to quit the European Union in June last year.
The dip in value has meant Brits holidaying in the likes of Spain and Italy have had their spending power already dramatically reduced, which has resulted in more people than usual opting for “staycations” in Britain, despite the poor summer weather.
The US investment banking giant Morgan Stanley believes the dilapidated British currency has further to fall and is pencilling in pound-euro parity in the first quarter of 2018, when £1.02 will buy just one euro.
It would signal the first time in its 18-year history that the euro has reached parity with sterling.
“The UK economic outlook looks bleak, with stretched household balance sheets, Brexit negotiation uncertainty potentially weighing on business investment and net exports growth staying subdued despite a weak pound,” a Morgan Stanley spokesman said. “On the politics front, risks have also increased, with the Conservative Party showing split opinions on the UK’s Brexit position, revealing inner party tensions.”
Those tensions emerged once again yesterday when a former chief of staff to Brexit Secretary David Davis claimed two Ministers have contacted him expressing sympathy for his calls for centrist MPs to form a new party.
James Chapman, who worked for Mr Davis, the MP for Haltemprice and Howden, after the EU referendum last year, said the Conservative Party would never again get a majority as its brand had been so badly damaged.
Mr Chapman, who has voiced criticism of Brexit on Twitter, said: “Two people in the Cabinet now, a number of people who have been in Conservative cabinets before now, better cabinets I might say than the current one, and a number of Shadow Cabinet Ministers have also been in touch.
“They’re not saying that they are going to quit their parties but they are saying they understand that there is an enormous gap in the centre now of British politics – the two main parties have been captured by the fringes.”
But staunch Brexit supporter Jacob Rees-Mogg, the Conservative MP for North-East Somerset, said that he would be “very surprised” if Mr Chapman was correct.
Mr Rees-Mogg added: “I think most people in the high levels of the party and across the Conservative Party and the nation have accepted the democratic result of the referendum a year ago.”
Morgan Stanley described Britain’s economic prospects as “bleak” as it heads for what appears to be a calamitous exit from the EU, with Tory Ministers unable to provide clarity on their vision for life outside the bloc.
Michael Gove, Boris Johnson, Philip Hammond, Liam Fox, Chris Grayling and Prime Minister Theresa May herself have all given contradictory statements about Conservative plans for trade, customs, tariffs, immigration, air control, a transition period and countless other facets of Britain’s divorce from the EU.
The pound’s collapse has been used by Brexiteers to herald a new dawn of trading that would span beyond Europe.
However, official figures on Thursday showed the trade deficit widened as a boost to UK trade again failed to materialise.