Will European Holidays Be More Expensive if Brexit Occurs?

Posted by Allison on 7 June 2016, 12:51

Exchange rates are always going to go up and down – that’s the whole point of them. You never know where one currency is going to stand against another one, but a particular currency pairing can always be filled with ups and downs. That’s the way it works.

With the EU referendum looming, many questions are being brought to the fore. Some people are wondering whether European holidays could be more expensive if we were to exit the EU. In reality, no one knows. If we do exit, the pound is probably going to drop in value against the euro for the short term. Yet no one knows whether this would be the result in the long term as well. When you consider other countries are looking to see what our result is before they decide on their own membership, the whole thing could turn into a house of cards.

But let’s look at what we know at the moment. Back in January, the average exchange rate between the pound and the euro was 1.3255. In February, the average had dropped to 1.2895. Fast forward another two months and the average was down even further, falling to 1.2623. Much has been made of the weakening pound in the face of uncertainty, yet so far in June (albeit in its very early stages) the pound is worth an average of 1.2875. Okay, so it isn’t quite up to the level it was at in January, but it is still doing rather well on the face of things.

The obvious concern for holidaymakers is how many euros they can get for their money. On New Year’s Day this year, you would have got 1.3624 euros to your pound. This is the actual exchange rate, not taking into account any fees or conversion rates provided by a bureau de change, since they can change. However, it gives us a figure to go by. The low point so far was reached in early April, when the exchange rate fell to 1.2375. This is a significant difference, yet at the moment it is standing at 1.2703.

Many have said that Brexit could result in a drop in value for sterling, but it may not be a drop that lasts for ages. And while foreign holidays are fine, they represent the short-term. Sterling will bounce back, whatever happens. No one can know how far it will drop, or indeed if it will at all. The markets could also react to any one of a number of other factors.

For example, if Brexit was the first in a series of events that led to the collapse of the EU, what would happen to the euro? Perhaps that is the real question.