UK’s small importers pay the price of weak pound
The fallout from a weakened pound is not being felt evenly across British businesses, according to new data from FEXCO Corporate Payments.
Smaller firms are bearing brunt of the majority of higher import prices, with costs for finished goods and raw materials from overseas suppliers higher following the Brexit referendum.
This has caused many SMEs across the UK to limit their levels of importing, according to the foreign exchange specialist.
Although the total amount of foreign currency purchasers was down just 7% in July, transaction sizes slumped by 29% compared to a year previously.
The overall picture did improve slightly in August, with the number of foreign currency purchases down 5% year on year, while transactions were 11% lower than 12 months before.
Despite this, many small businesses have still curtailed their spending and are potentially missing out on growth opportunities and sales as a result.
Alternative finance options do exist for those facing difficulties, but it remains important for firms to ensure any growth is sustainable in the long term, or they could be merely prolonging financial issues.
The issues facing small businesses are particularly paramount when activity among large corporates is analysed, as exports have actually risen by 7% during the last year.
Public sector organisations meanwhile made 6% more transactions in July this year when compared to the same month in 2015.
The pound is down 10% against the euro and 12% against the dollar today, when compared to the night before the 23 June referendum.
David Lamb, head of dealing at FEXCO Corporate Payments, adds that the behaviour of small firms suggests they are “feeling more pain than most”.
He adds that larger firms are able to protect themselves using hedging strategies when purchasing from overseas, as well as forward contracts that can lock in favourable exchange rates.
Small firms often to fail to do this, or lack the means to do so, meaning their ability to expand can come under threat.
By Phil Smith
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