British Overseas Purchasing Power Index: Outlook for Summer 2018 and Winter 2018

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PwC’s British Overseas Purchasing Power (BOPP) Index combines real wage and exchange rate trends in a single measure. The index covers the 27 countries where UK citizens spend the most on overseas trips.

This year’s update of the BOPP index includes projections of how the index might look in Summer 2018 as compared to the same period in previous years.

In addition to this, we also feature a new 'Winter Sun' variant of the BOPP index, which looks at the trend in the overseas purchasing power of UK wages in popular winter destinations such as Australia and Thailand in December of each year.

Our analysis projects a 6% recovery by August 2018 from the lows of August 2017, but UK holidaymakers will still find themselves 13% short of their pre-Brexit vote purchasing power and 18% down since before the financial crisis in 2007.

The key findings from our 2018 report are as follows:

  • In the years prior to the global financial crisis, the pound was generally relatively strong (particularly against the US dollar) and UK wages were rising in real terms (i.e. by more than consumer price inflation). These trends pushed up the overseas purchasing power of British wages, but after the crisis struck the pound fell sharply and real wages were squeezed
  • After a brief respite in 2014-15 when the pound recovered and real wages started to rise again, the Brexit vote has again hit sterling and pushed up prices, squeezing real wages once more, though these trends have started to reverse to some degree more recently
  • Our projections for the summer of 2018 show that British wages could buy 6% more overseas in August 2018 than last August. Holidaymakers could be able to buy 9% more in the US, 5% more in the euro area. This will however be 13% less than in August 2015 (prior to Brexit vote), and 18% less than in 2007 before the global financial crisis.
  • Our projections for Winter 2018 show that UK wages could buy 2% more than the same time last year on average in popular winter holiday destinations like Australia, India and Thailand. However, this is 10% less than in December 2015 before the Brexit vote and 33% less than in 2007 before the global financial crisis.

Within the euro area, British purchasing power has weakened most in Spain and Greece where local inflation was higher. The Brexit vote led to a renewed sharp fall in UK purchasing power in these popular holiday destinations.

Contact us

John Hawksworth
Chief UK Economist, PwC United Kingdom
Tel: +44 (0) 7841 803665
Email

Saatvik Bansal
Economist, PwC United Kingdom
Tel: +44 (0) 7872815771
Email

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