News in brief: EU, currency, Iran

News in brief
News in brief

Exchange rate could be rocked by EU uncertainty

The growth and profitability of UK SMEs trading internationally could be derailed by exchange rate volatility ahead of the UK’s referendum on its EU membership, according to the latest research by currency experts World First.

Currency confusion is also leaving many businesses dangerously exposed to this year’s likely currency volatility due to a lack of preparedness and a knowledge gap.

The survey of more than 1,000 senior decision makers at UK-based SMEs making cross-border payments found that despite 75% fearing that currency volatility from the EU referendum will impact their business, almost half (47%) are failing to take any notice of foreign exchange markets and over a third (35%) believe that having a currency strategy is not important.

The research also revealed the extent to which UK SMEs remain dangerously exposed to currency fluctuations with 45% admitting they have been caught out by a sudden movement in exchange rates and 26% having been severely impacted by market volatility.

World First chief economist Jeremy Cook said: “2015 was one of the most unpredictable years in currency market history and there is little reason to expect change in 2016. With the EU Referendum hanging like an economic Sword of Damocles, there is an enormous degree of uncertainty and concern in markets and therefore it’s crucial that any business operating internationally has a clear strategy for managing their currency exposure.”

Restrictions on trading with Iran lifted

Iran has received extensive economic and financial sanctions relief as a result of meeting its obligations under the nuclear deal agreed on 14 July 2015, meaning the country is now able to trade more freely.

UK Export Finance (UKEF), the UK’s export credit agency, has reintroduced cover to support UK companies seeking to compete for business in Iran. Cover is now available on a case-by-case basis in pounds sterling and euros. Within this, and in recognition of the UK’s place as a global centre of excellence for financial and professional services, UKEF will make available a £50 million facility guaranteeing payments to UK professional advisory service providers advising the government of Iran.

Minister for Trade and Investment, Lord Francis Maude, said: “The UK government fully supports expanding our trade relationship with Iran and we would encourage UK businesses to take advantage of the commercial opportunities that will arise from sanction relief. Following the reopening of the British Embassy in Tehran in August last year, UKTI now has a presence on the ground to support trade between our two countries.”