In spite of the uncertainties and turbulence triggered by the UK’s vote to leave the European Union (EU), only a small percentage of SMEs have done any planning to hedge the associated risks of an exit and plan for the unexpected. That was one of the claims made by speakers at an event in Cardiff organised by independent think tank Gorwel, dedicated to discussing the implications of Brexit for Wales.
The event was one of the first to be organised in any of the devolved nations of Wales, Scotland and Northern Ireland and saw some 100 business leaders and academics debate what Brexit means for Wales.
Speaking at the ‘Brexit – what next for Wales?’ event, Paul Langley, managing director of OSTC FX, said that in his experience only around 20 per cent of SMEs have changed their hedging strategy with the majority not hedging at all since Brexit.
The immediate effect of the vote to leave the EU saw sterling fall by 8-10 per cent. The Brexit vote has exposed businesses to supply chain risks, with business leaders facing major concerns regarding foreign exchange. Easyjet’s recent announcement that the weakened pound will cost it £90m in its current financial year is a striking example of how FX matters are dramatically impacting companies’ bottom lines.
“I have been involved in the currency markets for the past 35 years, going through Black Monday, the fall of the Berlin wall, The Gulf War, 9/11 and I don’t think I have seen more uncertainty than in the last 6 months following the vote,” said Langley. “Yet very few firms seem to have prepared for a potential exit and very few are doing so now. Some exporters are seeing an upturn and importers are seeing their costs increase but this volatility will continue for some time.
“My advice to companies is to prepare and one of the things they can do within that is review their supply chain and better manage currency volatility by fixing the rate they get long term.”