US Fed rate rise could be a headache for UK SMEs

By Dan Wilson December 16, 2015 - 3:15 pm

UK SME bosses could be set for more sleepless nights should the US Federal Reserve choose to raise interest rates later this week, with seven out of ten admitting their business could be better prepared to protect itself from currency volatility caused by a rate hike, according to the latest survey from international currency experts World First.

The survey of over 1,000 senior decision makers at UK-based SMEs trading overseas found that while 88% said they understood the potential impacts of a US rate rise on currency markets, 70% felt their business could be better prepared to deal with exchange rate volatility. The extent of the impacts are highlighted by the fact that more than half (51%) confess that the threat posed to their business by currency risks has kept them awake at night and one in four (26%) admit to having been severely impacted by currency movements in the past.

Jeremy Cook, Chief Economist at World First, said:

“UK SMEs remain dangerously exposed to currency market volatility at what is a crucial time in macro-economic policy. With the US and the UK’s economic fortunes on the up while key trading partners like the Eurozone and China continue to falter, businesses must do more to protect themselves from exchange rate fluctuations in order to protect margins and facilitate further growth.

“British businesses with a global outlook need to become much more hands on in managing and reviewing their currency strategy, particularly as many have only ever operated in a low interest rate environment. These mini-multinationals are now entering uncharted waters and it’s important they are aware as to how their currency exposure could impact their bottom line. A better understanding of the benefits of hedging will be crucial for any business exposed to the currency markets in 2016.”

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