From a high of $2.50 to £1 in 1971, the pound crashed to $1.033 on Monday morning. It has since recovered to $1.08. The steep decline is attributed to the financial market’s lack of faith in Kwarteng’s fiscal measures, which included tax cuts across the board. Monday’s fall could be due to remarks Kwarteng made on Sunday, hinting at further tax cuts. If these cuts are fully funded against borrowing by the U.K. government, the country could be looking at a mountain of debt.
In real terms, for the U.K., which is undergoing a cost-of-living crisis and reeling from post-Brexit trading losses, life will become even more expensive than it is, because most international buying, including technological products and fuel, is in U.S. dollars.
With regards to inward investment in film and high-end TV, the U.K. is one of the biggest markets for the U.S. with Marvel, Netflix and Amazon content being produced in large volumes in the country. The decline in the pound makes it that much cheaper for those productions, but they will find over time that those gains are offset by on the ground inflation due to high interest rates and price rises across the board.
The U.K. acquiring international content for domestic consumption will also become more expensive due to the pound crashing.
Meanwhile, the opposition Labour Party has commenced a four-day conference in Liverpool, where shadow chancellor Rachel Reeves has accused Kwarteng of “gambling all of our money.”
Reeves told the BBC Radio 4 “Today” show: “It is incredibly concerning. I think many people had hoped over the weekend things would calm down but I do think the Chancellor fanned the flames on Sunday in suggesting there may be more stimulus, more unfunded tax cuts, which has resulted overnight in the pound falling to an all-time low against the dollar.”