FINANCIAL TIMES: Gordon Brown, UK prime minister, holidayed in the UK. Who can blame him? Going abroad has become expensive for British people. The decline in sterling, which began last year, is now turning into something of a rout.
The UK is exposed in three ways to the aftermath of the credit squeeze. It has heavily overvalued housing, the most indebted consumers in the world and an economy that is peculiarly reliant on financial services. High borrowing costs, a painful housing market correction and losses in the financial sector mean most of the UK’s assets have been dramatically revalued down. Sterling has suffered.
Against the euro, it has lost a sixth of its value since last summer. Against the US dollar, it has lost 13 per cent of its value. This week has been especially brutal. After nine successive days of falls, the pound is now trading at levels closer to those it plumbed in the aftermath of Black Wednesday than to the highs of last summer. A downbeat medium-term assessment from Alistair Darling, chancellor of the exchequer, some dire economic predictions and weak domestic data led to a 2.5 per cent fall against the dollar since Friday afternoon alone. Sterling Takes a Royal Pounding >>> | September 3, 2008
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