The Salary Calculator

Election come down

by Admin

So after all the hype and canvassing and the debates, the results are in – and it’s a hung Parliament, the first since 1974. What does that mean for your money? Well, first of all, the pound has fallen against other currencies – 4 cents against the dollar and 3 cents against the Euro – bad news if you were about to go on holiday!

Why is this? In short because the value of a currency is related to how confident investors are in a country’s economy. Historically, hung parliaments in Britain are unable to act as swiftly as majority governments, because consensus must be found by the members of coalition parties – who often disagree on certain principles. These delays in acting may hinder our recovery from the recession – so investors would rather not be holding on to the pound. Of course, if it does lead to a slow recovery (or even the “double dip” recession some analysts have been predicting), then this could continue to hit us in the wallet for months to come – with the effects of the recession continuing rather than abating.

Another area that was to be decided by this election was income tax and National Insurance. As I wrote previously, all the parties had set out in their manifestos their intended changes to the PAYE system. I put these all in the Election Comparison Calculator – which shows you want impact these differences would have on you. With no party yet in charge, it’s not clear what will happen about this – whose policies will be enacted? The Conservatives, who have the largest number of seats, said they would hold an emergency budget to implement some of their changes before next year. We’ll have to wait and see to find out what really happens.

Tags: Economy, election, euro, Foreign Currency, foreign exchange rates, holiday, holiday money, income tax, national insurance, Pay As You Earn, pension, Pensions, personal allowance, pound, recession, recovery, tax rates, The Salary Calculator, unemployment

Pound falling against the Euro

by Admin

I have a trip to Paris coming up and it’s prompted me to check out the current exchange rate on the excellent X-Rates site. As you’ll see if you click on that link, Sterling has been falling over the last month or so.

As I wrote a few months ago, the Pound had improved both against the Euro and the Dollar during the summer months, which was good news for those of use on holiday there. It didn’t reach the highs of 2008, but it had improved since last winter. However, during August and particularly in September, a lot of the ground the Pound had made up was lost against both currencies. The pound is currently worth €1.09, from a high during the summer of €1.18, making travelling to Europe very expensive for us Brits.

I believe the reason for the Pound’s decline is the fact that the UK is still in recession whereas the powerhouses of Europe, Germany and France, have successfully grown their economies. Hopefully we will see in the next few months Britain exit from recession, and then the Pound will become a more attractive currency for investors, making it stronger and (importantly) worth more.

Tags: dollar, Economy, euro, Foreign Currency, foreign exchange rates, holiday, holiday money, pound, recession, recovery

The cost of Japanese goods

by Admin

While we often look at foreign currency exchange rates with our minds on our holidays and how much the food will cost us abroad (see my previous post), they affect us in other ways when we are still at home.

A strong pound can affect British businesses, impacting their export sales as their products cost more abroad and therefore fewer people buy them. The opposite, of course, is true – a strong pound makes importing foreign goods cheaper, and a weak pound makes it more expensive. With so many consumer electronics made abroad, this affects us at home.

I’ve been watching the price of camera equipment, much of which is made in Japan. A year ago, there were more than 200 Yen to the pound, which meant that buyers over here could get a good deal on lenses and the like. However, compare this graph of the cost of a Canon lens with this graph of the pound vs. the Yen. As the pound dropped as low as 122 Yen, vendors in the UK have had to increase their prices almost £100 (on that lens – more expensive products have gone up more).

As the pound gathers strength, it is climbing back up against the Yen and the cost of consumer electronics will come back down. With the country still in a recession, retailers will be competing for sales and should therefore lower their prices as soon as the rates get more favourable – passing the savings on to us! I hope so, at least – I really want that lens.

Tags: consumer electronics, electronics, Foreign Currency, foreign exchange rates, pound, yen

Holiday exchange rates

by Admin

Like a lot of people, I’m keeping my eye on foreign exchange rates at the moment. Those people lucky enough to go on holiday abroad this year have been worrying about the weak pound ever since they booked the ferry! Fortunately, the pound has been getting stronger over the last few months and while it’s nowhere near the levels it was this time last year, it’s a significant improvement on 6 months ago, when it was pretty much £1 = €1.

It’s improved against the dollar, too – from $1.38 a few months ago to $1.65. Although most of us will be comparing this with the $2.00 rate that was stable for some time in 2008, it’s worth remembering that that was unusually high, and $1.70 or $1.80 is more like the standard value. Compared to this, $1.65 is not too bad.

While a strong pound is good news for holidaymakers, the British tourist industry often suffers as fewer people visit our shores, and those that do come spend less while they are here. Hopefully this summer will see an improvement on previous years as visitors from the US, the Eurozone and even Japan are all still getting a good deal on their pounds, and more natives stay at home to beat the exchange rate!

Although some people in the industry are negative, believing that economic uncertainty and unemployment will mean fewer people will be taking advantage of the tourist industry, the fact that the pound is still lower than it was last summer should pull visitors in from abroad and hopefully give the industry a shot in the arm.

Exchange rates can be monitored here.

Tags: dollar, euro, Foreign Currency, foreign exchange rates, holiday, holiday money, pound