Sterling dived in value against the euro yesterday, hitting an all time low of 1.1890. It has also fallen to a six-year low in dollar terms. A combination of unemployment figures at their highest for 10 years, and worries over deflation have prompted investors to sell sterling.

The pound is below $1.50 for the first time since July 2002. Holidays in the Euro zone will now cost approximately 20% more than a year ago.

Buying a EUR500,000 house in France at the end of 2007 would have cost £354,600; today the sterling price would be £420,520.

See the FT Adviser which argues that the recession could result in a parity between the euro and sterling by the end of 2009