THE pound has fallen to its weakest level against the US dollar since 1985 amid fears the UK is heading for a lengthy recession.
On September 7, Sterling fell 0.64% to $1.145 – but today the $1.14 barrier has been broken for the first time in four decades. The pound dropped 0.8% to $1.137 on Friday morning.
Over the past three months, which have been dominated by Boris Johnson’s downfall and the resulting Tory leadership election race, the pound has fallen by 7.92% against the US dollar.
Friday’s drop in the value of Sterling came after figures from the Office for National Statistics (ONS) revealed that retail sales in the UK fell by 1.6% between July and August.
Consumers are thought to have been put off spending due to skyrocketing energy bills, with further increases expected into the winter.
The ONS also found that 48% of adults said they were already finding it “very or somewhat difficult” to afford their energy costs in a survey between August 31 and September 11.
The weakening of the pound will only worsen the impact on UK energy prices, which are reliant on global markets.
A weaker pound would, in theory, help to boost exports as UK products become relatively cheaper for foreign buyers. However, James Withers, the former boss of Scotland Food and Drink said that this was not the case on the ground.
Sharing graphics showing the UK trade deficit is nearing record highs, Withers tweeted: “The UK is suffering ongoing malaise. While others around us are fitter & better able to manage shocks, we’re unable to function as we used to. Slower, weaker, vulnerable.
“Yet, treatment is withheld; govt even denies symptoms exist. This is Long Brexit and we’re all living with it.”
He added: “Bear in mind, the pound is the weakest it has been for 40 years. Our exports have never been more competitively priced.
“But it’s not enough if you create the harshest trade barriers and red tape of any government in generations. All with our nearest neighbours too,” he wrote, adding emojis suggesting the UK was shooting itself in the foot.
The pound also fell to its weakest level against the Euro since early 2021 at €1.142.
However, Simon French, an economist who formerly worked at the Cabinet Office, said that the pound’s fall against the US dollar was likely due to the strength of the American currency, rather than an “event” that would see it permanently lose value – as Brexit did.
UK households have seen their energy costs surge by 54% after the price cap for an average home increased to £1971 in April.
The fortnightly ONS cost-of-living survey also revealed an increase in concerns from consumers over their regular spending.
It showed that 82% of adults reported “being very or somewhat worried about rising costs of living” in the past two weeks, edging up from 81% a fortnight earlier.
It compared with 74% when households were first asked the question in May.
Around a quarter of adults – 26% – also said they are unable to save as much as usual, when asked about the current state of their household finances.