The growth and profitability of UK SMEs could be derailed by exchange rate volatility ahead of the UK’s referendum on its EU membership, according to latest research commissioned by international money transfer experts World First.
The survey of over 1,000 senior decision makers at UK-based SMEs found that despite three-quarters fearing that currency volatility from the EU referendum will impact their business, almost half (47%) are failing to take any notice of foreign exchange markets and 45% admit to having previously been caught out by a sudden movement in exchange rates.
According to World First’s own data, the average UK SME trading overseas made international transfers to the value of £256,700 last year, meaning that the nation’s ‘mini-multinationals’ would have made an estimated total of £78bn in international payments in 2015.
This clearly sets into context the need for businesses to better manage their currency exposure to protect themselves in what is set to be a volatile 2016, given increasing uncertainly around the UK’s membership of the EU and the prospect of further interest rate rises by the Federal Reserve and a slowdown in China amongst other threats.
Commenting on the results, Jeremy Cook, chief economist at World First, said: “2015 was one of the most unpredictable years in currency market history and there is little reason to expect change in 2016. With the EU Referendum hanging like an economic Sword of Damocles, there is an enormous degree of uncertainty and concern in markets and therefore it’s crucial that any business operating internationally has a clear strategy for managing their currency exposure.
“One only has to look at the precedent set by the Scottish Referendum, which saw sterling lose around 6.5% against the USD in the two months before the vote, to realise how great a threat this could be to the thousands of ‘mini-multinationals’ in the UK.”
And with the pound already under pressure so far in 2016, now could be a great time to think about getting a sound FX strategy in place for 2016 to help protect your business from the slings and arrows of market volatility and help you budget for the year ahead.
To find more about how to set a budget and protect your bottom-line in 2016, visit worldfirst.com or call 020 3773 4855 to talk to one of their friendly dealers today.