Overseas purchasing power of UK earnings 22% below 2007 peak

Overseas purchasing power of British wages is 15% below its initial value in 2000, with gains reversed by the financial crisis, EU referendum and Brexit vote, according to new analysis by PwC.

The global accounting firm's new British Overseas Purchasing Power index, published on Monday (23 October) found that in popular holiday destinations Greece and Spain, travellers from the UK have lost 22% of their purchasing power since 2000, which was its peak in 2007.

Across the euro area as a whole, UK purchasing power is 17% below its initial 2000 level.

PwC's index combines the real wage squeeze story and the exchange rate story for the first time in a single metric.

The index includes movements in domestic wages, exchange rates and overseas prices, covering the 27 countries where UK citizens spend most overseas.

Commenting on the findings, John Hawksworth, chief economist at PwC, said anyone going on holiday this summer will have noticed that the pound buys less than it did a couple of years ago.

"This latest dip in sterling is largely driven by the Brexit vote and seems unlikely to end anytime soon, but our index shows that this is part of a longer term trend stretching back to the financial crisis."

PwC's analysis is weighted according to UK overseas travellers' spending patterns so that Spain has the highest index weight at 21%, followed by the US, France, Italy and Greece.

In total, the euro area makes up 62% of the index, but it also extends worldwide to cover countries like Australia, India, Thailand and China.

In the US, UK purchasing power rose sharply by 47% between 2000 and 2007, but has now fallen back to slightly lower than it was 17 years ago.