Currency unpredictability for SMEs based on the EU vote
Three-quarters of UK SMEs that trade internationally, fear currency unpredictability from the EU vote could hamper their growth and profitability in 2016.
A survey of more than 1,000 decision makers at UK businesses making payments in foreign currency, found that despite 75% expecting exchange rate fluctuations, nearly 50% are failing to pay proper attention to foreign exchange markets.
The study (conducted by a foreign exchange specialist) found that the average UK SME trading overseas made international transfers to the value of £256,700 in 2015, meaning the nation's 304,200 SME importers and exporters would have an estimated total of over £78 billion in international payments over 12 months.
2015 was one of the most unpredictable years in currency market history and there is little reason to expect that to change in 2016 with the EU referendum looming. Of course, in the 2 months leading up to the Scottish Referendum, GBP lost over 6% against the US dollar which could be potentially a huge hit for a UK SME.
With this huge degree of uncertainty in the foreign exchange market, it's vital that any business operating internationally has a clear strategy for managing its currency exposure.
The same study also highlighted a lack of comprehension over how exchange rate movements affected business, with 43% of businesses admitting that they did not fully understand this and half saying currency markets "scared" them.
Research in December 2015 (conducted by another foreign exchange specialist) found that 50% of SMEs had been negatively affected in the past year by currency movements, including China's market mayhem, while more than 10% said they had been badly affected - almost double the figure of 2014. This is put into even more perspective as exports to the country topped those to the US last year with more than 25% of small British businesses saying they export to China, compared with just 9% at the start of 2014.
With such uncertainty within the foreign exchange market currently and that doubt seeming to historically not ease in the run-up to a referendum, simply talking to Procuright could put your mind at ease. Our foreign exchange partner is authorised and regulated by the Financial Conduct Authority and offer bank beating exchange rates, an option to trade online in 34 currencies with an additional 18 over the 'phone, segregated customer accounts (to safeguard client funds) and a free foreign exchange health check/ assessment of your business' FX requirements to help pin-point where you could improve your margins.
"2015 was one of the most unpredictable years in currency market history and there is little reason to expect that to change in 2016 with the EU referendum looming. Of course, in the 2 months leading up to the Scottish Referendum, GBP lost over 6% against the US dollar which could be potentially a huge hit for a UK SME."