Currency fluctuations costing £900m a year

SMEs need to do more to protect themselves against currency fluctuations, says World First


Currency fluctuations are resulting in small and mid sized firms losing nearly £900m a year, new research has shown.  

According to the report from World First, small and medium sized firms are unaware of how to protect themselves adequately against the volatility of currency exchange rates which can lead to otherwise profitable contracts becoming loss-making for many companies.

The pound fell nearly 20% in value against the dollar between July and October and fell 7% in just 48 hours between 20 and 22 October.

This dramatic decline in the value of sterling is hitting companies hard, said Alex Sullivan, head of corporate foreign exchange at World First. “This is difficult enough in the good times, but when sales and profits are under pressure a currency loss can be enough to bankrupt a company.”

World First’s research shows that UK-based small and medium sized enterprises are involved in one fifth of the UK’s import and export business, with a price tag of £141bn. Yet most do not protect themselves against currency fluctuations.

“There are options available to SMEs that allow protection against currency risk without locking in unfavourable exchange rates,” said Sullivan.

“In a week where the government has attempted to ensure the future of UK SMEs through tax cuts and training schemes, and the pound has fallen to a five-year low against the US dollar, it is clear these companies need to be smart with the foreign currency they use to do business.”

© Crimson Business Ltd. 2008

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