Holidays hit as pound sinks to an all-time low

STERLING plummeted against the euro to a new low in early trading today as one pound after commission bought less than one euro for the first time.

Holidaymakers and business travellers were faced with the dire exchange rate at the Travelex bureau in London City airport.

Evening Standard paid £99.98 for just 97 euros last night as sterling continued to plunge to all-time lows against the euro.

As thousands prepared for Christmas holidays, experts warned that things would get worse and that further falls could be expected.

European breaks now cost up to 30 per cent more than this time last year, when travellers enjoyed an exchange rate of 1.40 euros for the pound.

The pound hovered around 1.08euros on the money markets yesterday but tourist rates are always worse. Today it slumped to 1.07euros.

Airports take advantage of travellers' last-minute panic to buy currency, factoring wide profit margins into rates and charging high commission.

Glenn Uniacke, dealer at currency specialist Moneycorp, said: "The pound has reached another record low against the euro on the back of disturbing run of form, and holiday makers are now in the position of seeing their holiday costs massively increased. It is the first time holiday makers have bought less than one euro for their pound and they are finding it a bit of shock.

"Businesses have faced the same cost increases due to the pound's weakness but have more facilities open to them such as forward contracts. The economic downturn is global phenomena, but there's a perception that the UK's problems are more acute, which is adding to the pressure against the pound, and the worst may yet not be over."

The pound has now fallen 14 cents against the euro in three weeks as the Bank of England slashed the interest rate to two per cent in an attempt to prevent a deep recession.

Investors are choosing to shun the pound because the UK interest rate is below that in the euro zone and could yet fall to near zero. Mark O'Sullivan, dealing director at Currencies Direct, said: "This is likely to get worse as more investors lose confidence in the pound."

The gloomy economic data emerging from Britain adds more downward pressure on sterling.

The jobless claimant count topped one million for the first time in eight years yesterday as it emerged that dole queues are lengthening at their fastest rate since the Nineties recession. Short sellers are also betting on sterling continuing to fall.