The sharp fall in sterling since Britain voted to leave the European Union has encouraged tourists to go on a spending spree, providing a little relief for the economy as it faces an overall sharp slowdown. Foreign visitors have helped boost high street sales since the referendum on June 23, Britain’s official statisticians say.
London’s West End shopping district has also reported increased spending by non-resident shoppers whose dollars, euros and other currencies are now worth more.
“We’ve bought shoes, bags, suitcases,” Ulrika Wigenborg said as she and her daughter carried bags stuffed with a Louis Vuitton suitcase and new handbags along London’s Bond Street.
“We came in November and the currency was so high, we didn’t buy anything. But now it’s good,” the marketing manager from Sweden said before heading off to search for watches.
The pound fell sharply in value after the Brexit vote as investors positioned themselves for years of uncertainty about Britain’s ties with its major trading partners in the EU.
It sank to levels against the U.S. dollar not seen since Margaret Thatcher was prime minister and it remains down about 13 percent against the dollar and 10 percent against the euro.
The slump means inflation is set to rise, cutting into the spending power of British households which drove the country’s strong economic growth over the past three years.
But there are upsides to a weak currency. Manufacturers have seen higher export orders. And foreign visitors are spending more in the world’s eighth-most visited country, where in 2015 they generated revenues of 22 billion pounds.
The Brexit effect might also be helping Britain to lure visitors away from other European countries.
According to tax-free shopping firm Global Blue, tourist spending on luxury goods in Britain in August rose by 36 percent while in France it fell by 20 percent.
France’s foreign minister said in July that the country’s tourism sector was at risk from Brexit as well as a run of poor weather, strikes and the risk of further militant attacks.
Michael Wainwright, managing director at London luxury jeweller Boodles, said he, like many people living in the capital, had been bitterly disappointed by the Brexit vote.
But his firm was now seeing more customers from the United States, the Middle East and South East Asia. “We sell Patek Philippe watches, they’ve been extremely buoyant,” he said.
Official statistics show that watch and jewellery sales in Britain jumped nearly 13 percent in August and 18 percent in July compared with the same months in 2015.
Meanwhile, more Britons spent their summer holidays in the country because of the higher cost of travelling abroad.
Merlin Entertainments, which runs the Madame Tussauds waxworks and Legoland, expects a profit boost from the rise in “staycations” as well as higher spending by foreigners.
Marc Chandler, senior vice president for foreign exchange at U.S. bank Brown Brothers Harriman, said the pound would probably fall further when tough talks begin with the EU about a new, post-Brexit deal.
“When was the last time that London as cheap for Americans? Thirty years ago. For the Chinese it’s almost 10 years ago,” he said during a visit earlier this month.