Britons will pay more for everything they buy on their Christmas and winter breaks as the pound slumped to a record low against the euro.

Two years ago £100 bought 145 euros – today some travellers are picking up less than 100 euros for £100.

Many families will now have to cut holidays abroad next year, while those who have already booked will have to budget spending on items such as car hire, meals and drinks.

Yesterday the pound to hit 1.136 against the euro – the pound’s lowest value since the Euro was introduced in 1999.

The ‘tourist rate’ for the pound dropped to 1.07 euros. Travellers buying currency at airports were given even less – in some cases once commission is deducted, £100 is converts to 99 euros.

Britons take more than 30m winter and summer breaks in European countries where the euro is the currency. Winter breaks in France, Austria, and Italy resorts will be among the first to be hit.

Everything tourists buy abroad will be more expensive – from the taxi ride from the airport to drinks, food and car hire.

While the cost of package deals later this year is unlikely to be significantly affected by the change, holidaymakers will have to carefully count their euros while abroad.

Travel agents are holidaymakers stretch their pounds by recommending trips to non-euro countries like Turkey.

Against the US dollar the pound is at $1.48, down 25% since the start of the year.

Analysts believe the pound is falling so sharply because of growing fears over the recession gripping the British economy.

In the City, the FTSE opened at 4381 and fell 14 points to 4367. In New York, the DOW rose climbed from 8693 to 8761 – putting on an extra 68 points.

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Tags: British Pound, Budget, Currency Crisis, Euro, FTSE, Recession, UK Recession

The pound plunged to a record low of 87.5 pence against the Euro following a think-tank report painting a gloomy picture of Britain in recession.

The National Institute of Economic and Social Research said the economy shrank by 1% in the three months to November – and contraction is speeding up.

The think-tank’s figures show the economy shrank by 0.8% in the quarter ending October 31.

The October industrial production figure – the eighth monthly fall in row marking the longest run of falling output since 1980 – dragged annual output down by 5.2%, the sharpest year-on-year decline since 1991 when the UK was last in recession.

The report followed desperate figures from manufacturing, housing and retail sales on Tuesday, that boosted expectations that a steep recession will put more pressure on the Bank of England to slash interest rates to record levels.

NIESR said that the outlook for 2009 was grim: “The Government faces the real risk that, despite the measures it took in last month’s Budget, output will fall more sharply than it expected to the end of next year. The main problem that it needs to address very urgently is the availability of bank credit; further interest reductions are unlikely to have much effect.”

“There is every reason to believe that the output decline in the fourth calendar quarter of the year will be larger than 1% in magnitude.”

Despite the pound’s losses against the euro, it edged up 0.2 percent to $1.4767 against the US dollar as word hit Wall Street of moves to inject cash to bail out US carmakers.

“These readings made a strong case for the United Kingdom ultimately suffering the worst recession in the developed world,” Commerzbank analysts said in a research note.

Despite the gloom, the FTSE closed up 81 points at 4381 after opening at 4300 but the DOW fell from 8934 to 8691.

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Tags: British Economy, Euro, National Institute of Economic, NIESR, Pound, Social Research

The UK’s biggest supermarket chain is treading water with sales growth down to 2% on the back of cheaper brands targeted at cash conscious shoppers.

Tesco has snatched 300,000 extra customers by going down market in a drive to keep sales by competing with Netto, Lidl and Aldi.

The 2% sales increase is only half that of the previous quarter and the company’s lowest growth rate for 15 years.

To stimulate spending and consumer confidence, the Bank of England is rumoured to be ready to cut interest rates by as much as another 1% on Thursday.

This is against a backdrop of more jobs axed or threatened in the lead up to Christmas.

Swiss bank Credit Suisse has cut 650 jobs – about 10% of the bank’s UK workforce – and HSBC has sacked another 500 people. Although many people have sympathy with those losing jobs this close to Christmas, it only seems fair that the banks that stirred up the current financial mess are suffering as well.

Car accessory retailer Halfords plans to shed 250 jobs. About 200 posts would be cut across the firm’s 450 stores, along with 50 more at the head office in Redditch, Worcestershire.

Land of Leather looks like the next retail casualty as the firm revealed a number of possible buyers had approached the struggling firm.

Sales are 47% down on the year and the share price has tumbled from £1 to just 9p since January. This gives the firm a market capitalisation of £3.2m – less than its cash reserves of £6.9m.

The company is debt-free but Barclays Bank holds £4.5m of the capital, as insurance against having to repay credit card payments if the company goes bust.

On the markets, the FTSE closed 38% down at 4065 and the DOW 4.43% down at 8149, a fall of 670 points.

The Pound weakened against the US dollar to $1.48 and closed at £1.18 to the Euro.

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Tags: Aldi, Bank of England, British Pound, Credit Crunch, Debt, Dollar, Euro, Interest Rates, Lidl, Netto, Redundancies, Tesco

The potential rout in national economies that is threatening to spread across Europe like a bush fire seems to be gathering pace as hungry and injured Hedge funds look on while licking their chops at the huge profits such a cascading currency crisis presents…and Iceland was just round one.

The former Soviet bloc is in the epicentre of the current round of frightening developments swirling around Europe…and Euro sceptics are rejoicing as the currency pegs that hold the now fragile Economies of Europe together look like being ripped out like tent pins in a hurricane.

After the rejection of the Lisbon treaty in Ireland, the EU ruling elite can ill afford a monetary strain on top of the political strain that has recently thrown the direction, if not the very existence of the EU, into doubt.  Should a serious test of the EU monetary system find Brussels wanting, their grand plans will lie in tatters and could force European countries out of the EU as resurgent nationalism destroys the great European unification process…the Grand Plan. Make no mistake; there is a very real danger here that that is precisely what will happen.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

European banks are heavily exposed to the upheavals in the emerging blocs on the fringe of Europe in Latin America and Asia. Ukraine, Serbia and Hungary are all at the IMFs door, cap in hand. Economies like Austria and Switzerland could follow as their liabilities to the emerging markets are over 50% of GDP.

Hans Redeker, currency chief at BNP Paribas, says there is an imminent danger that East Europe’s currency pegs will be smashed unless the EU authorities wake up to the full gravity of the threat, and that in turn will trigger a dangerous crisis for EMU itself.

“The system is paralysed, and it is starting to look like Black Wednesday in 1992. I’m afraid this is going to have a very deflationary effect on the economy of Western Europe. It is almost guaranteed that euro land money supply is about to implode,” he said.

Look out below.

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Tags: Currency Crisis, Euro, Europe, European Currency, Global Credit Crisis, Lisbon Treaty, Monetary System