The pound dropped to a fresh record low against the euro on Thursday, breaking through the 95p for the first time, as the prospect of further interest rate cuts from the Bank of England continued to punish the currency.

The pound was also undermined as a government report showed the UK’s budget deficit widened to a record level in November as tax revenue declined in the face of the worsening recession and takes the losses for the week against the euro to more than 6 per cent.