The pound is trading at a new 31-year low level against the dollar at $1.2749, having been hit hard this week by Theresa May’s announcement that she will trigger the Brexit divorce proceedings by March 2017.
But how will the slide in the value of our national currency affect different groups in society?
The summer holidays are over now but many people who changed their pounds into euros or dollars after 23 June will have noticed that their money went a lot less far than it did before.
Some airport bureau de change were even offering less than €1 for £1, despite the market exchange rate being more than €1.14.
People preparing to book winter breaks overseas or foreign holidays for next summer early will soon notice a spike in prices.
Inflation is still pretty low at just 0.6 per cent in August. Food prices are subdued thanks to the ongoing supermarket price war.
But that is not likely to last for long.
The price of imported food and other goods is rising because of sterling’s depreciation. And the price of raw materials for UK firms, which tend to be priced in dollars, is also increasing pretty rapidly.
These increases will ultimately be passed on to customers in the form of higher prices.
The Bank of England thinks consumer price inflation will spike above its 2.5 per cent target by the beginning of 2018.
This means that the weekly food shop is likely to be more expensive relatively soon.
And so will high street shop prices.
The further sterling declines, the bigger the price impact on families.
Workers have seen wages finally rising in real terms in recent years.
But this is not because nominal wages are rising strongly, but because inflation has been so weak.
Nominal average wages rose at an annual rate of just 2.3 per cent in July – well below the pre-financial crisis average rate of around 4 per cent.
If the pound’s fall does push inflation up, employers are unlikely to push nominal wages up to compensate.
The result will be a new squeeze on the purchasing power of wages.
Some goods exporters will benefit from the slide in sterling. Their exports will become instantly cheaper on world markets.
They could hike sales prices to increase short-term profits.
Or they could keep them fixed and benefit from an increase in foreign demand and market share, which could help their longer term profitability.
To meet this new foreign demand they could increase hiring. They might also need to increase wages to attract more workers.
There are some signs of these positive effects, UK manufacturing firms are reporting strong growth in export orders since the referendum vote.
The fall in the value of sterling has also made some UK business assets look cheap.
There was some suggestion that the takeover by Japan’s SoftBank of the UK chip firm ARM could have been influenced by the weakness of the sterling exchange rate.
There is also specific impact on multinational FTSE 100 companies which report their profits in sterling but have a large share of their revenues in foreign currencies.
They have tended to see their share prices rise with each downward lurch of sterling since depreciation automatically makes them more profitable.
People taking on big new mortgages to move house should not feel any direct impact from sterling’s depreciation, assuming they are paid in sterling and they are buying in the UK.
If they are buying abroad, however, they could face a problem because their money will not go as far as it did.
Alternatively, if they are buying in the UK and they are paid in foreign currency they will have benefited.
At the top end of the London housing market the fall in sterling seems to have made UK assets look better value, although the market is still weak.
What experts have said about Brexit
What experts have said about Brexit
1/11 Chancellor of the Exchequer Philip Hammond
The Chancellor claims London can still be a world financial hub despite Brexit “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs” “This has not changed as a result of the EU referendum and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”
2/11 Yanis Varoufakis
Greece's former finance minister compared the UK relations with the EU bloc with a well-known song by the Eagles: “You can check out any time you like, as the Hotel California song says, but you can't really leave. The proof is Theresa May has not even dared to trigger Article 50. It's like Harrison Ford going into Indiana Jones' castle and the path behind him fragmenting. You can get in, but getting out is not at all clear”
3/11 Michael O’Leary
Ryanair boss says UK will be ‘screwed’ by EU in Brexit trade deals: “I have no faith in the politicians in London going on about how ‘the world will want to trade with us’. The world will want to screw you – that's what happens in trade talks,” he said. “They have no interest in giving the UK a deal on trade”
4/11 Tim Martin
JD Wetherspoon's chairman has said claims that the UK would see serious economic consequences from a Brexit vote were "lurid" and wrong: “We were told it would be Armageddon from the OECD, from the IMF, David Cameron, the chancellor and President Obama who were predicting locusts in the fields and tidal waves in the North Sea"
5/11 Mark Carney
Governor of Bank of England is 'serene' about Bank of England's Brexit stance: “I am absolutely serene about the … judgments made both by the MPC and the FPC”
6/11 Christine Lagarde
IMF chief urges quick Brexit to reduce economic uncertainty: “We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making”
7/11 Inga Beale
Lloyd’s chief executive says Brexit is a major issue: "Clearly the UK's referendum on its EU membership is a major issue for us to deal with and we are now focusing our attention on having in place the plans that will ensure Lloyd's continues trading across Europe”
8/11 Colm Kelleher
President of US bank Morgan Stanley says City of London ‘will suffer’ as result of the EU referendum: “I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much”
9/11 Richard Branson
Virgin founder believes we've lost a THIRD of our value because of Brexit and cancelled a deal worth 3,000 jobs: We're not any worse than anybody else, but I suspect we've lost a third of our value which is dreadful for people in the workplace.' He continued: "We were about to do a very big deal, we cancelled that deal, that would have involved 3,000 jobs, and that’s happening all over the country"
10/11 Barack Obama
US President believes Britain was wrong to vote to leave the EU: "It is absolutely true that I believed pre-Brexit vote and continue to believe post-Brexit vote that the world benefited enormously from the United Kingdom's participation in the EU. We are fully supportive of a process that is as little disruptive as possible so that people around the world can continue to benefit from economic growth"
11/11 Kristin Forbes
American economist and an external member of the Monetary Policy Committee of the Bank of England argues that the economy had been “less stormy than many expected” following the shock referendum result: “For now…the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction”
Tourist sector workers
The fall in the value of the pound has made the UK cheaper and more attractive to foreign tourists.
This is good for anyone who works in the hospitality business or the part of the retail sector aimed at tourists.
Retail sales seem to have been boosted since the referendum by an influx of tourists.
Like people with mortgages, the direct impact on pensioners of sterling’s fall should be neutral in that they have a stream of payments in sterling and they spend in sterling.
If they have savings invested in FTSE 100 companies pensioners might even have seen some benefit from the depreciation.
An exception is those UK pensioners living in Spain. Their sterling-denominated pensions paid from the UK will now buy less locally than they did previously.Reuse content