UK SMEs facing £34.6bn US election currency risk
According to research done by World First, the economic volatility around the US election, and a weakening pound related to Brexit, have opened UK SMEs up to currency risks equating to £34.6bn. 38% of businesses are worried about currency volatility over the next three months
Awaiting the result of the US election, British small businesses are reluctant to lock in USD rates with many unhedged beyond the election putting them at risk from future currency volatility.
And the plunging pound following the EU referendum on June 23rd means that Q3 saw 28% of SMEs feeling the negative impact of exchange rate movements versus 23% in Q2. With 23% of businesses saying currency volatility has impacted business investment decisions in Q316.
Jeremy Cook of World First says: “Calling 2016 an eventful year politically and economically would be a bit of an understatement and SMEs have certainly felt the impact that momentous events like Brexit and an unpredictable US election have had on currency volatility. With sterling tumbling over Q3, it is unsurprising that many businesses have felt the need to alter their investment decisions.
“Nevertheless, it’s not over yet and as we head into a fraught US election which could bring up more surprises, UK SMEs need to brace themselves for a bumpy road ahead. We’ve seen the pound fall against the dollar by record amounts over the past few months, and for businesses without the right foreign exchange protection this can add a lot of pressure on margins.”