Sterling Drop - What Does it Mean for You?


October 2016

Sterling Drop - What Does it Mean for You?

The value of the pound has been falling fairly consistently over the past couple of months, with a particular sharp drop in the last week, but what does this mean for you and your money?


One of the first things you might notice will be prices for several commodities increasing in shops up and down the country. Most notably, the largest food manufacturer in the UK, Unilever (whose brands include store cupboard staples like Hellman’s and Marmite) recently announced that it would be increasing its prices in the country by 10%. Despite being based in the UK, Unilever imports most of its goods. With the pound having fallen value by around 20% against the dollar, and 15% against the euro, over the past few months, the price importing has gone up.

While some supermarkets, including Tesco and Asda, initially refused to pass on the price increase to customers, many did so without question. Both Tesco and Asda eventually relented, but it is understood that Unilever met them somewhere in the middle in terms of the size of the price increase.

Travelling Abroad

You’ll also likely feel the effect if you go on holiday soon. At the time of writing, £1 will buy you about €1.10, but some bureaux de change at airports were reported to be offering far worse rates, with £1 buying just €0.88.

What does this mean going forward?

While the pound has recovered some of its lost ground after a particularly sharp ‘flash crash’ earlier in the week, the Governor of the Bank of England, Mark Carney, has said that he expects inflation to continue to rise in the coming months.

“It is going to get difficult,” he said, “as we move from no inflation to some inflation.”

However, he said, the various stimulus measures that the Bank introduced back in August should still work to stop thousands of potential job losses. Further, the tools the Bank has at its disposal should allow it to work with increasing inflation to boost the country’s economic growth generally.

After Carney delivered his statements, the pound increased in value somewhat against the dollar.