British exporters ‘sitting ducks’ to exchange rate fluctuations

UK businesses are doing more business overseas: but are they prepared for the extra challenges they are exposed to as a result?

Two-thirds of British medium to large businesses are doing more export business than 12 months ago. But many are not protected against exchange rate volatility, according to research by currency specialists FEXCO.

The report is based on a poll of more than 100 CFOs and key decision makers from UK businesses. It suggests that around one-third (32%) have no safeguards in place to protect them from fluctuations in foreign exchange rates.

IT & telecoms has seen the biggest increase in exporting activity. More than three-quarters (77%) of UK companies in the sector have increased their exporting activity in the past 12 months.

Manufacturing & retail and catering & leisure have also both seen 75% of businesses export more across the same period.

As a result of this increased activity almost half (44%) of respondents said that at least two-fifths of their financial transactions are undertaken in a currency other than Pound Sterling.

>See also: Benefits of hiring a commercial exchange rate adviser

Surprisingly, companies in sectors that should perhaps know better are among the least likely to take protective measures.

Two thirds (67%) of financial services companies and three quarters (75%) of professional services firms admitted to having no strategy to mitigate their currency risk.

FEXCO Commercial FX Services head of dealing David Lamb warned that, in a climate of “tight margins and volatile exchange rates”, effectively managing currency can make all the difference.

“For example the Pound slumped 5.3% against the Euro in just one week in August – more than enough to turn a profitable deal into a loss-making one,” he continued.

“Failure to fix an exchange rate can work in a company’s favour if it’s lucky, but with the stakes so high, it’s unwise to leave it to chance.

“So it’s alarming that such a large minority of companies leave themselves as hostages to fortune – and do nothing to protect themselves from exchange rate fluctuations.”

Further reading: Convertible loan notes explained

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