Key Takeaways
- The UK Budget will make several proposals around public spending and taxation.
- The Budget’s tax and spending measures could affect the UK economy, with potential secondary effects on the British pound and its exchange rate.
- If your payments involve GBP/EUR conversions, you should monitor the situation around Budget day to see how changing policies might influence rates.
- Doing so can help you limit trading costs or take advantage of beneficial rates.
The UK Budget is an annual statement in the UK House of Commons that lays out public spending and taxation proposals alongside economic and fiscal forecasts.
This year’s Budget is set for 28 October 2026, but proceedings around it last longer as the Budget’s delivery is followed by multiple days of debate. After that, the government’s tax and spending proposals proceed separately through Parliament, and some of those measures will be implemented in the weeks and months that follow.
In short: the Budget could have an impact on the UK economy and exchange rate in the coming weeks, with Budget day itself marking key announcements. It’s an important date to note if you transact with GBP/EUR currency pairs.
How the UK Budget Can Move the British Pound
The UK Budget and the policies that it produces could have first-order effects on the national economy and secondary effects on the British pound.
Here’s how the Budget could affect key areas:
- Inflation and interest rates: The Budget shapes expectations around inflation, and the Bank of England may take the Budget into account in its future interest rate decisions. This influences demand for, and pricing of, the British pound.
- Government borrowing: Government bond issuance and yields may change in response to the Budget, affecting demand for GBP-denominated assets.
- Tax and spending policy: Budget proposals can impact costs for individuals and businesses, thereby influencing demand for GBP.
- Economic growth: Investor demand for GBP can fluctuate based on whether each Budget proposal is seen as strengthening or weakening the UK economy.
- Existing market expectations: The Budget’s overall alignment with expectations that are already in place can also influence GBP rates.
This means the Budget can affect inflation, interest rates, and government borrowing. The effect on the pound is secondary but potentially far-reaching: any economic change could influence demand for GBP and, in turn, FX rates.
How a 1% Change in GBP Value Affects a €100K Invoice
If you run a UK business that invoices in euros, how could exchange rate movements around Budget day affect the amount you receive in pounds?
Here’s an illustrative example of how a small change in the value of the pound can affect your bottom line.
1. Consider a 1% Change in GBP Value
Let’s look at what happens if the value of the British pound (GBP) rises or falls by 1% against the euro (EUR). We’ve chosen this figure to show how even a modest change can have a noticeable impact on larger transactions.
This is not a prediction that the UK Budget on 28 October will cause a 1% exchange rate change, or any change at all. It’s simply an example to help you understand and prepare for currency fluctuations.
2. Calculate the Impact on a €100K Invoice
Suppose you receive a €100,000 payment and convert it into pounds at an exchange rate of €1 = £0.85.
- Before the change: €100,000 = £85,000
- After a 1% increase in the value of GBP: €1 buys approximately £0.8416
- New total: €100,000 = approximately £84,158
- Impact: You receive approximately £842 less.
Conversely, if the value of GBP falls by 1% against EUR instead, you would receive approximately £859 more.
3. Why the Direction Matters
If your business receives euros and converts them into pounds, a weaker pound generally works in your favour: each euro buys more pounds. A stronger pound has the opposite effect.
The impact can add up quickly if your business regularly receives payments in euros. A difference of around £850 on a single €100,000 invoice could become much more significant across multiple invoices over a month or a year.
The takeaway: Understanding your exposure and tracking GBP fluctuations around budget day and beyond can help you plan conversions and manage currency risk.
Note: this is an illustrative example, not a prediction of how exchange rates will move on Budget day.
Track GBP to EUR rate alerts.
Three Things Your UK Business Should Do Before 28 October
Understanding FX rates is just the first step. Preparing for Budget day means taking stock of your trading options to make the most of any rate fluctuations.
1. Review Your Upcoming GBP/EUR Payments
First, think about the GBP/EUR transactions that you plan to carry out. Look at euro-denominated bills and invoices that you intend to pay in British pounds, as well as inbound EUR payments that you plan to convert to GBP.
You can use our 1% estimate to model the effects of FX rate fluctuations. Even if no change occurs, it can help you assess whether costs and savings would offset each other, or whether you should take steps to preserve value on your transactions.
2. Plan for the Costs of a Rate Shift
Second: consider your trading options in case GBP rates move in an unwanted direction around 28 October. You can offset costs by using the most cost-effective trading platform you have access to or by seeing if you qualify for reduced pricing tiers.
You can also pursue advanced FX risk management strategies such as hedging and forward contracts, though these require planning and are not last-minute solutions.
3. Make the Most of Favourable Rates
Finally, plan for beneficial FX rates, not a worst-case scenario. Remember that a stronger British pound presents a chance to save money on outgoing cross-border payments, and a weaker pound is an opportunity to collect payments in euros.
Look at your pending transactions and, if they present an opportunity to maximise value, make sure you’re in a position to execute them as soon as possible.
How Payset Can Help
At Payset, we offer several features that can help your business transact and convert GBP while working with the changing UK economic landscape:
- British pound support: Transact and trade GBP alongside other currencies.
- GBP to EUR rate alerts: Monitor conversion rates in real time.
- International payments: We’ll help you get your funds beyond the UK with support for up to 35 currencies in 180+ countries.
- Local UK networks: We route payments on the UK’s Faster Payments (FPS) and CHAPS networks as applicable, and on SWIFT and other major networks.
- Tiered FX rates: Our rates get lower the more you trade — a feature that’s ideal for UK businesses planning their finances beyond Budget day.
- A strong UK presence: Payset is authorised by the FCA as an electronic money institution (EMI). We support customers in the UK and around the world.
Ready to get started with Payset? Sign-up is free and we’ve waived our monthly fees. Check our pricing page to see the current state of this offer, or click below to sign up.
