As UK and EU officials prepare to meet in Brussels this week to forge a divorce deal agreement new research reveals that affect that the split could have on UK’s 5.7 million SMEs.
The survey reveals one in three professionals managing international payments at SMEs say that forward planning is “not easy” or “not easy at all” in the current climate of economic uncertainty. Furthermore, over one in four say economic uncertainty is their biggest barrier to trade, while almost half identify it as their biggest concern for their future international trade and payments needs.
One area in which Brexit-fueled uncertainty has been most strongly reflected is the currency market, which saw Sterling slump to a 31-year low against the US dollar immediately after the referendum. Looking forward, one in four SMEs, however, say that they could only tolerate a 5 per cent negative FX move before facing financial difficulty, with this figure jumping to one in three in the event of a 10 per cent unfavourable FX swing.
To counter negative effects of currency volatility over the past 12 months, the top two choices for SMEs have been to absorb increased costs themselves or increase prices to pass on additional costs to customers. Over the past 12 months, on average UK businesses passed on a 19 per cent price increase onto consumers to counter FX, rising to 33 per cent for finance, insurance and real estate businesses.
The increase remains high for the energy and utilities sector, but falls to 10 per cent for retail, wholesale and food.
To help SMEs manage risks and navigate the economic climate of uncertainty, Western Union Business Solutions has developed a new online tool where firms can benchmark their FX pricing models for free and understand how they can maximise their international cashflows.
