Soaring Sterling: Strong pound brings Britons bargain breaks

BRITISH consumers can look forward to a summer of bargains thanks to the the strong pound. At home clothing, footwear and electrical goods will be better value, while on holiday they will be able to buy more for their money.

Economists said yesterday that the pound was likely to remain strong until the end of the year, meaning that consumers have some time to take advantage of the situation.

"The pound has got strong very quickly," said Michael Hughes, group economic adviser to Barclays Capital. "By virtue of that some people are not aware of what's going on."

Adam Cole, UK economist for HSBC, said: "With goods such as electrical products and clothing the trend is quite clearly downwards." He added:"Wages, on the other hand, are going up so this boosts consumer spending."

Clive Vaughan of Verdict Research said the most striking difference would be not that goods got cheaper but that consumers would get better quality for the same price. He added: "We have done a lot of work on footwear and retailers are saying that because of the strong pound the quality of the product is going to be better.

"So, for example, the inside of the shoe is more likely to be leather and the workmanship is better.

"The same is true for clothing. You are more likely to find Italian styling at a very, very competitive price. We also expect to see great value for money on electrical goods because of a combination of the strong pound with the problems in South-east Asia."

Demand in a lot of Asian countries is expected to fall because of the currency difficulties. The financial turbulence means that overseas sales will be more important and keener prices will follow to make sure sales are maintained

Other imports that may fall in price are cars and wine. "But that may not necessarily be the case because the price reductions may not be passed on to the consumer by the retailer," said Mr Hughes.

"The car market is fairly buoyant at the moment so the retailers may not feel the need to pass the cut prices on. So you may not see your Mercedes getting cheaper."

The other way that consumers will benefit is when they go abroad. "We are getting very unusual complaints," said Jackie Gibson of the Association of British Travel Agents (ABTA).

"There are some people who have booked early and then the second editions of the brochure have come out with cheaper prices, as people have taken advantage of the different exchange rate. Some of the companies have offered refunds although others haven't."

She said that those on self-catering holidays would reap the benefits. "The average amount we spend on holiday is almost as much as the holiday itself costs - we spend on average pounds 360 on holiday and pounds 320 cash when we are there. The biggest value is going to be on things you actually spend out there."

She said that particular areas people should look out for were Greece and South-east Asia. Mr Hughes agreed. "Too many hotels have been built in South-east Asia and so you can get four or five star hotels at low prices," he said.

"For instance, a hotel which would normally cost pounds 220 a night you could get for pounds 75. There are also a lot of competitive flights to that region.

"Sterling is also stronger against European currencies than the dollar so you won't get many bargains in America," he added.

Sunworld said that there "had never been a better time to head for Greece," with drachma standing 524.42 to the pound. Dinner for two costs on average pounds 4.75 per person and a bottle of suntan lotion pounds 2.86. Buying wine and beer at a supermarket would work out at pounds 1.90 for the wine and 38p for the beer.

Lunn Poly said that City Breaks to European cities were also proving popular because of the strong pound.

However, there is some less welcome news for consumers.

"The disadvantage is that the longer the pound says strong the worse news it is for British industry," said Adam Cole.

"Exports are not as strong and the implications are that employers may be looking at the number of people they employ."

spending power in Europe

The devalued drachma means Athens is now the best value-for-money city for visiting Britons.

Tourists taking trips to the Greek capital are now getting 26 per cent more drachmas to the pound than a year ago.

Next best value cities are Dublin (offering 19.1 per cent better exchange rates) and Lisbon (up 15.28 per cent), according to figures compiled by American Express. John Howells, the company's UK and Ireland foreign exchange director, said: "The growth of sterling means that spending money will go a lot further this spring."

He went on: "Every element of the holiday will be affected - accommodation, transport, entry to museums and galleries as well as eating and drinking."

Here are the top value-for-money cities showing how much further the pound will go in March 1998 compared with March 1997

CITY INCREASE IN SPENDING POWER

Athens +26.31%

Dublin +19.17%

Lisbon +15.28%

Amsterdam +13.86%

Berlin +13.70%

Brussels +13.67%

Madrid +13.62

Paris +12.91%

Rome +11.53%

Geneva +7.90%