Holidaymakers heading to the US will find their spending power has shrunk after the pound fell to just $1.21. As recently as February, tourists could get $1.33 for £1, while five years ago £1 was worth about $1.68.

Against the euro, the pound dropped to €1.083 having opened in markets this morning at €1.0855.

The pound went into free-fall after the Office for National Statistics announced GDP fell 0.2 per cent between April and June, compared to a 1.2 per cent rise in the same three-month period a year ago.

Aashna Shroff, personal finance expert at money.co.uk, said: “More bad news for British holidaymakers, with the pound falling again against the US dollar and euro. For anyone who’s heading abroad in August, it’s worth taking some steps to protect your travel money against volatility. Even if you’re not travelling for a few weeks, it could be worth buying some of your travel money now to mitigate potential currency fluctuations.

“By purchasing some of your currency immediately, if the pound does fall further, you will have benefitted from today’s rates. Of course, there is a risk that the pound could go up, but it could give you some peace of mind.”

Shroff also suggested that holidaymakers who need to book a hotel or hire a car, consider paying in advance where possible, to protect themselves against further falls in the pound.

“Many operators will give you the option of reserving these services and not paying until you arrive or check-out. However by paying in advance, you will know what the trip will cost you, without any surprises from currency fluctuations,” he said. “If you’ve already booked a hotel or hire car, then it’s worth contacting the operators to see if you can pay now, rather than wait until the end of the hire or at check-out.”

Holidaymakers exchanging cash before their trip abroad should shop around for the best rates.