Will it be a fresh start for the pound in 2017?

The pound has taken a bit of a battering over recent months, resulting in price hikes on household goods and weaker than usual exchange rates when we go abroad.

Nevertheless, a new year is almost upon us and with big decisions like the Brexit vote now in the past, we’re all hopeful that the pound will rebound over the next 12 months.

What lies in store for the pound?

Experts think the value of the pound will increase as we enter 2017, especially against the Euro. Lloyds’ November International Financial Outlook adjusted its pound to Euro exchange rate forecast for mid-2017 from 1.18 to 1.19 following the US election[1]. Barclays has also increased its 2017 GBP/EUR rate, moving from 1.25 to 1.3157[2], as well as showing steady gains against the US dollar throughout next year.

What does this mean for your money?

As the pound gains against other currencies, logically your money should start to stretch that bit further again. However, experts seem to think that rising interest rates will cause the opposite to happen in reality.

According to the National Institute for Economic and Social Research, real income per person will decline by 0.5% in 2017[3], as inflation skyrockets by around 4%. At the same time, the price of goods is expected to grow “rapidly”, meaning the next 12 months could make purse strings feel tighter than most of us hoped.

BRC chief executive Helen Dickinson recently told the press: “It is inevitable that imported inflation will begin to make its mark and we would expect to start to see this effect coming through in the first quarter of 2017.”[4]

Research from Noddle suggests that to many Brits, this won’t come as a surprise. Over a third (35%) admitted they are worried about what will happen to the price of everyday goods in the New Year, while 12% said that concerns about getting less for their money abroad will change their future holiday plans[5].

Making a little go a long way

To protect yourself against any fluctuations in the pound in 2017, as well as the effects of rising inflation, getting a money management strategy in place is likely to be key. For many, this is something that they will already have or it will be a natural reaction to seeing prices rise. More than a quarter (26%) of people told us in November that they will watch their general spending more following the pound’s recent fall in value, while 19% will reconsider their purchases in their weekly grocery shop.

To help your money go a bit further next year, here are a few tips and tricks that could save you pounds.

  • Keep an eye out for discounts.
    When money isn’t tight, it can be tempting to spend more of it simply because it’s convenient to buy something now rather than wait or look elsewhere. However, keeping an eye out for discounts and offers can help you save money on everything from household goods to clothes and holidays. Discounts and offers are also great for making sure you can still enjoy life’s little luxuries, such as takeaways, family days out and trips to the cinema.
  • Don’t put off switching utilities providers.
    High utilities costs are often named as one of the key reasons why people struggle to make ends meet. In fact, 77% of homeowners have said they will take steps to ration the amount of energy they use this winter because of high energy prices[6]. However, by moving to a cheaper tariff, many Brits could save money. In July, the Competition and Markets Authority revealed that switching could save duel fuel customers £160 a year on average[7] but savings can often be much greater still. To find out how to switch, read our blog ‘How to switch energy providers without the headache’.
  • Take a look at your lenders.
    When you took out that credit card, loan, mortgage, mobile phone contract etc, you might have got a great deal. However, a year or so on and you could find that you’re paying more than you need to. This is why it’s important to look at what you’re paying currently and then do some research to see if you can get it cheaper elsewhere. Of course, some of your lenders will have fixed terms and exit fees linked to their contracts, so you also need to factor this in. Nevertheless, if you’re able to switch, you could end up spending much less over the short and long-term paying back your lenders.
  • Make sure you’re putting your money in the right place.
    It’s important that you get the best possible value on your current and savings accounts but unfortunately banks like Santander and HSBC have started to cut their interest rates. This means that your money may not be accumulating as quickly as it has done in the past. To give your cash pot the best possible chance of growing, compare current and savings accounts on the market and switch if you can find a better rate.
  • If you’re going abroad, don’t get your money last minute.
    If you want more for your money when you travel abroad, it’s important that you get a good exchange rate. To increase your chances of getting this, you probably shouldn’t leave getting your foreign currency until you get to the airport. This is because airports usually offer poorer exchange rates and you could end up paying commission charges. Instead, start looking at the way the pound is performing against the currency you’ll need for your holiday as soon as possible. Experts will often predict peaks in advance, so if you buy when there is a good rate you’ll get more bang for your buck.

No matter what happens to the pound and inflation next year, being proactive when it comes to managing your money is good practice to ensure you’re in the best possible financial position. Follow the above tips and hopefully 2017 will be a good year for your money.

 

 

[1] Lloyds, International Financial Outlook, November 2016

[2] https://www.poundsterlinglive.com/eur/5765-gbp-to-eur-forecast-2017-barclays and http://www.newrybureaudechange.com/barclays-forecast-rebound-british-pound-euro-exchange-rate-2017/ and https://www.poundsterlinglive.com/exchange-rate-forecasts

[3] http://www.niesr.ac.uk/publications/uk-economy-forecast-summary#.WDRNsI-LRD9

[4] http://www.retailgazette.co.uk/blog/2016/11/new-report-warns-of-price-hikes-in-2017-due-to-post-brexit-inflation and http://www.mi-pro.co.uk/news/read/brc-there-s-been-no-brexit-impact-on-retailer-prices-yet/021634

[5] All data is taken from a Censuswide survey of 1,000 respondents, run between 2nd November and 4th November 2016.

[6] On 30 September 2016, Bilendi conducted an online survey among 1,283 randomly selected British adults who are Maximiles UK panelists who are homeowners

[7] https://www.gov.uk/government/news/cma-sets-out-case-for-energy-market-reform