Small companies review foreign exchange hedging strategies after Brexit shock
Small and medium-sized businesses feel they need to change their approach to foreign exchange hedging after the Brexit vote, according to new research.
Some 77 per cent of firms said they needed to change their approach, but 80 per cent of the 75 SMEs surveyed by Earthport said they had failed to act since the vote, despite being “completely exposed to currency market risks”.
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Writing in City PM, Peter Klein, global head of FX at Earthport, said: “It appears that for the most part, these businesses have been hoping that Britain’s economy would not be damaged by the vote, as was initially expected – coupled with a wilful blindness to the risks posed by the potential for a weaker pound.”
Some 64 per cent of those surveyed said the cost of doing business had increased since the vote.
Klein added: “Britain’s economic outlook is much less certain now and the pound has weakened further since September, losing another nine per cent in value after a call for a stronger separation from the EU than was previously expected.
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“Already hard-pressed businesses that failed to hedge after the vote are now having to bear even higher costs.
“The fact is that if British small medium businesses are to reduce their risks, thrive and remain competitive in the new post-Brexit reality, they can’t afford not to hedge against foreign exchange fluctuations.”