why has the pound devalued against the euro?

Answer 1

I would say it's mainly lack of confidence in our financial system ...

As soon as it became obvious that the US sub-prime market was in difficulties and some of the debt might have ended up in Europe, and the banks were becoming reluctant to lend to one another, the EBC stepped in and offered every EU Bank whatever loans they wanted and guaranteed all money in all EU Banks = this avoided a run on any EU bank and maintained investor confidence ..

Meanwhile Northern Rock was in desperate position because they funded a high portion of their Mortgage loans from the short tern money markets that had all but dried up .. initially the BoE refused to do anything, however when no other bank wanted to help out they eventually got around to providing an 'Emergency' (high interest) loan to Northern Rock (and the Government was good enough to mention that 90% of the Depositors first £35k was safe) ... needless to say as soon as they found out about the loan depositors assumed they were about to loose 10% of their money and, egged on by the press, the panic started ..

After 3 days, the bank was essentially dead and the Government woke up to the fact they the BoE might not get its money back .. so they then said they would guarantee 100% of the depositors money but by now no-one wanted to believe anything the Government said (in fact a good portion of the electorate believe the OPPOSITE of whatever the Government says)...

NR shareholders, mindful of how the Government had pulled the plug on Rail Track, dumped NR shares for whatever they could get .. and all the other UK Bank shares suffered as share holders tried to work out who would be the next Bank to be ruined by BoE dithering .. and so the process became self reinforcing ..

Europeans looked on with horror at the (self generated) chaos in the UK banking system and started to move their money elsewhere ..