British expats are switching their money out of Sterling and stashing their cash in local currencies to take advantage of higher savings rates.
Bank base rates in favourite expat destinations like Australia, South Africa and New Zealand are all above those offered by international offshore banks with British connections.
Sterling is also having a rough ride against many currencies.
Lloyds TSB International has researched the market and found that British expats are more likely to move their cash to the country where they now live rather than keep their savings offshore.
This is one reason that has sparked the closure of several offshore subsidiaries of British banks and building societies over recent months.
Offshore bank for sale
Now, Lloyds is negotiating the sale of its £100 million offshore personal wealth arm to Swiss bank Union Bancaire Privée, partly as a drive to divest assets to increase the value of its balance sheet and partly due to decreasing business opportunities.
According to the report, only 13% of expats keep their savings in Sterling – half the number who did so in September 2011.
While almost three out of four expats keep their money in the currency of the country where they live, just 3% keep their money in a third currency.
Nearer to home, British expats in the Eurozone are also switching their money in to local currency, even though the base rate is similar to that in the UK.
Andrew Pipe, senior economic adviser at Lloyds TSB International, said: “Sterling is currently weak against the Euro, mainly because investor confidence is returning to the Eurozone, while many still view the economic outlook for Britain as less bright.
Playing the markets
“The Eurozone crisis led expats and investors to park currency in Sterling to safeguard their funds, but the European Central Bank pledge do what was needed to make the Euro survive rekindled confidence in the Euro and encouraged investors and expats to transfer their money out of Sterling.”
Another reason for the big switch is currency exchange rate fluctuations and related exchange charges that devalue the pound in saver’s bank accounts.
The banks are also suffering from currency exchange specialists undercutting their fees when expats move money around the world.
Expats are finding predicting currency rates harder, but lose less money by managing their cash better rather than trying to make a killing playing the markets.