Pound down 5% against the rupee: Why it's time to book your UK holiday now

The depreciation also brings cheer for those looking to study and invest in the UK

The depreciation in the pound sterling (GBP) has brought cheer for those looking to travel to the United Kingdom (UK) for leisure or higher studies. Even those looking to invest in property in UK can get good rates, given that the pound has depreciated against the rupee by about 5 per cent over the last three months and the current conversion rate stands at Rs 82.28 for one British pound.

Those with children going abroad to UK later this year (academic terms start between August and October) should convert their currency now and keep the funds ready, says Naveen Chopra, co-founder of The Chopras, an educational consultancy firm.

“Most UK universities take tuition fees only after the enrolment. Students usually have to pay only application fees (if applicable) or confirmation fees which could be 500-1000 Great Britain Pound (GBP). Other than that, the universities don’t take tuition fees upfront. So, if UK is the first choice you can keep the funds ready by converting into pound at the current rates,’’ he says.

If your child’s admission is confirmed, you could request the university to accept the fees upfront. But remember, confirmation is dependent on the marks at the graduation level and most colleges in India would announce results only by June or so.

UK has been one of the more expensive destinations for higher studies due to high currency cost. On an average, the tuition fees alone for a one-year post-graduation course would cost 16,000-17,000 GBP (approximately Rs 1,31,2000 to Rs 1,39,400 at current levels). Those already studying in UK will benefit because their living expenses would come down.

UK is no longer among the top destinations preferred by Indian students following the change in the visa rules. “UK is preferred only by those who have business interests there. Middle class students prefer other countries like Australia, Germany, Canada or Ireland,’’ says Chopra. 

According to the website of the UK Council for International Student Affairs the number of students from India have been declining. It was 19,750 in 2013-14, 18,320 in 2014-15 and 16,745 in 2015-16.

Travel companies have seen higher inquiries in holiday packages as tourists want to take advantage of the falling pound. According to Karan Anand-head, relationships, Cox and Kings says: “We introduced UK only packages to take advantage of this situation. Over the last few months, we have seen a demand for both groups and independent travellers to UK.’’

Air fares are also available at competitive prices making it an affordable destination. For instance, a tour called Gems of Britain, which is an eight-day/seven-night group package that covers London, Cardiff, Manchester, Liverpool and York, starts at approximately Rs 60,000 per person without airfare.

“In fact, if you compare it from February to April of this year there has been a five per cent weakening of the pound versus the rupee so that’s the difference in cost,’’ Anand points out.

If you want to book a package now to travel later, say June or July, that is also possible. If you go with all your 'know your customer' documents, the travel firm can close the package for you with the foreign exchange at the current rates. The season for leisure travel to UK typically ends in July.

For those looking to invest abroad, the fall in the pound may offer only marginal gains, says Pramod Gubby, head equities, Ambit Capital. “Depreciation in the pound would perhaps help at the margins, but it is not the primary driver. One should look at the primary qualities of the asset. It depends on the specific market and the fundamentals of the asset class. In equity, it is the underlying cash flows of the company in question. That’s likely to be the biggest driver of returns,’’ he says.

Even in the case of international mutual funds, the reason to invest should be the need to diversify away from India, and not currency alone. Besides, Indian investors are not really keen to invest overseas given the optimism in the domestic markets, he adds.

Outlook for the pound is stable for now with risks tilted towards the downside. Though the upside potential in the short term is limited, it could see some if French elections go in favour of Macron as that may see the euro head higher for a bit. Inflation, upcoming elections, political uncertainty and the current account deficit will continue to weigh on GBP, says Manmohan Tiwana, managing director & chief executive officer, Wodehouse Capital Advisors.

“A weaker pound has already resulted in many ultra high net-worth individuals purchasing properties in UK. Within UK, London and more specifically Central London has always been a preferred choice of the rich and the famous. There is a reasonable upside for such investments if one has an investment horizon for at least three years," he adds.

Outward Remittances under the Liberalised Remittance Scheme (LRS) for Resident Individuals

(US dollar million)

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Source: RBI monthly bulletin