Here comes the 10 franc pound ... and Britons are fleeing to riches abroad

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The Independent Online
Britons travelling in Europe yesterday found their money worth at least 20 per cent more than last year as sterling rose to a six- year high and hovered on the psychological 10 francs to the pound mark.

Despite the absence of American traders on Independence Day, the pound peaked at 9.994 francs, sparking confident speculation that next week would see it break the 10 franc barrier for the first time since 1991.

The national mood might be upbeat with new Labour and a string of sporting successes bringing fresh optimism, but millions of Britons are heading abroad to cash in on the favourable exchange rates.

Holiday companies are reporting a 25 per cent increase in business on last year because of the strength of the pound and the miserable British weather. The Association of British Travel Agents (Abta) said that the upturn could lead to a record year - with 15 million people buying package holidays.

"Business is booming," said Jacqui Kirk, a spokeswoman for Thomas Cook. "The industry is 25 per cent up, but our outlets are experiencing a 45 per cent increase on last year. If you go anywhere in Europe at the moment, you will find that your money goes much further."

According to Thomas Cook, pounds 250 bought 59,703,500 Turkish lira yesterday, compared with 32,075,000 a year ago - a real increase in spending power of pounds 115 per pounds 250 exchanged. In Spain, pounds 250 is worth pounds 43.44 more than last year; in Greece it is worth pounds 44.82 more; in Tunisia it is worth pounds 44.94 more; and in Portugal the increase in value amounts to pounds 38.11 per pounds 250.

The result is much cheaper goods and services at your holiday destination. Research by Thomas Cook shows that an average three-course meal in Spain costs pounds 8.80 this year, compared with pounds 10.65 in 1996. In Greece, the saving is pounds 2.55 on a similar meal, while in Portugal, holidaymakers will save about pounds 1.30 per head.

Maxine Pancaldi, a spokeswoman for First Choice, Britain's third largest tour operator, predicted an increase in sales of winter holidays, too. "Many people haven't actually cashed in on their building society windfalls yet, so we are expecting them to think about taking a second holiday later in the year or spending the money on that long-haul destination they've always fancied. The savings once you get there are really quite substantial, particularly for families," she said.

"It could be a record year," said Keith Betton, spokesman for Abta. "A number of favourable factors have come together to benefit the travel industry. Firstly, there is the strong pound, which is good news all round.

"Then there are the building society windfalls, which have given a lot of people an unexpected bonus to spend on luxuries like holidays. And there is the awful weather. That really matters. Two years ago, the weather here was beautiful and sales of holidays abroad slumped."

The strong pound now will also mean cheaper holidays next year because companies are negotiating next year's prices at the moment.

"Holiday companies are very competitive, so those savings will be passed on to the customer," said Mr Betton.

The markets expect the 10 franc barrier to be broken next week, particularly if the Bank of England puts up interest rates to dampen the consumer boom.

"It is probably just a matter of time," said Kit Juckes, head currency strategist at Nat West Markets. "If you have German interest rates at 3 per cent and French rates at about 3.1 per cent while ours are moving from 6.5 per cent northwards, it makes for a pretty high-octane mix."

Many observers were expecting the barrier to be broken yesterday, but a quiet day left it short by the tiniest fraction of a centime.

"If it hadn't been for the July 4th celebrations in America, and the lull caused by Wimbledon and the cricket here, then it might have made it," said Mr Juckes. "But it will probably make it next week."