Pound Fails To Pack A Punch As Small Importers Hit Hard
The pound sterling is still worth 10% less against the euro and 12% less against the dollar than it was before the EU referendum
UK small importers are still suffering from higher costs exactly three months after the EU referendum, according to a report by FEXCO Corporate Payments.
The report, which analysed more than 6,000 international transactions, revealed that all UK businesses that import, either raw materials or finished goods, have seen the prices they pay their foreign suppliers rise since Brexit.
Disproportionally affecting smaller businesses, the total number of foreign currency purchases made by smaller enterprises in July was 7% down on last year, with the average transaction size 29% less – as importers appear to tighten their purse strings.
In contrast, the number of foreign currency transactions made by large corporates actually rose by 7%, while public sector organisations made 6% more transactions than in July 2015.
In comparison to other currencies, the pound sterling is still worth 10% less against the euro, and 12% less against the dollar, than it was pre-EU referendum.
David Lamb, head of dealing at FEXCO Corporate Payments, said:
“Our research indicates that large companies and public sector organisations are much more likely to use hedging strategies when buying from overseas. Products like forward contracts allow them to lock into a favourable exchange rate and protect themselves against adverse currency movements.
“However small firms that don’t hedge against this risk leave themselves open to costly dips in the Pound’s value. Our data shows they are trying to mitigate the risk by making smaller import purchases than they did at this time last year – but this bodes ill for their ability to grow.”