Britons abroad feel pinch from pound

[LahoreEstate]

Glyn Davies and his wife feed 850 children a day at the charitable school they run in Mombasa, Kenya.

For many of the kids, it is the only meal they get each day.

But they fear some of them may have to go hungry, as the weak pound has undermined the value of the donations they receive each month from their sponsors in the UK.

"I need to find £2,400 extra each month," Mr Davies says by phone.

"It's purely down to the weak pound. Our donations haven't reduced during the credit crunch at all."

Mr Davies is not alone.

Although few face such stark consequences, many Britons living abroad who rely on income from the UK are finding it harder to make ends meet.

Sterling slide

The pound fell dramatically against most currencies last year as the depth of the economic downturn became clear.

Against the dollar, it was trading above $2 in July but sank to a 23-year low of $1.35 in January. Against the euro, it fell to a record low of one euro for one pound in late December. STERLING 12-MONTH FORECASTS
Barclays: $1.803
Bank of America: $1.29
Citigroup: $1.36
HSBC: $1.611
Lloyds: $1.37
RBS: $1.44
Source: Reuters

The rates available to people on the ground were often much worse, once charges and commission were taken into account.

Politicians warned of a sterling collapse, while cheap shopping trips to New York and across the Channel looked to be consigned to the past.

In Mombasa, Mr Davies has seen sterling exchange rate against the Kenyan shilling fall from about 135 in August last year to about 113 now.

The means that the school, which costs 1.5m shillings a month to run, is getting about 300,000 shillings less each from its normal transfers.

"January was the worst time we'd ever had."

Mr Davies says the reserve money they have been using to make up the shortfall will soon run out and they are considering "drastic measures".

"We run quite a lean budget, so we've either got to raise substantially more money or we'll have to cut costs," he says.

"And the easiest cost to cut is to stop feeding the children - which we don't really want to think about."

No recovery in sight

The charity is unlikely to see any respite this year.
It's a shock to see the pound this far down

Sam Evans, Spain

Most currency analysts do not expect the pound to fall further from current levels, but nor do they expect sterling to recover much ground.

Investors are concerned that the steep cost of the banking bail-out and other measures to stimulate the UK economy will undermine the pound.

"Sterling will remain under pressure because of these funding concerns," says Simon Derrick, chief currency strategist at Bank of New York Mellon.

A February poll of 60 currency analysts by Reuters news agency suggested that the pound would be at $1.40 to the dollar in three months' time and $1.52 in 12 months' time.

Forecasts varied widely, ranging from $1.26 and $1.86 in a year from now, but all were below the $2 the pound was trading at this time last year.

Sterling's prospects against the euro look similarly lacklustre. One euro was forecast to be worth 92 pence in the three months and 87 pence in 12 months.

Pensions hit

Sam Evans, 55, and his wife Ann moved from County Durham to Llanos del Peral in Almeria, southern Spain, 16 months ago when they took early retirement.


The weak exchange rate has hit expats as well as tourists
The pound's slide has almost halved the value of their monthly pension, forcing them to cut back on meals out, trips back home to see their family and other luxuries.

When they first arrived in Spain, their UK pension was worth 1,200 euros a month but in January, they only received 700 euros as the sliding exchange rate took its toll.

The exchange rate they get has risen slightly since Christmas, when it was about one to one, to about 1.11 euros for every pound now.

Mr Evans religiously checks the exchange rate each morning on his computer and he says it's the big topic of conversation among fellow expats.

"When we purchased the house here, it was at 1.52 euros [to the pound]," he says.

"It's a shock to see it this far down."

Mr Evans has also taken on some extra work doing maintenance on a nearby holiday home to make ends meet.

But they say they have no plans to return to the UK.

They own their home outright and say they steer clear of tourist areas and go to local markets to cut shopping costs.

"We're managing at the moment. As long as the rate stays the way it is, we will survive," Mr Evans says.

http://news.bbc.co.uk/2/hi/business/7905879.stm