SMEs 'feeling currency fatigue'

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Small and medium-sized enterprises (SMEs) are becoming increasingly concerned about volatility in the currency markets.

According to World First’s Global Trade Barometer, 38 per cent of SMEs said they suffered as a result of exchange rate movements in the final three months of 2016.

This compares with 28 per cent in the previous quarter.

Jeremy Cook, chief economist at World First, believes this is a reflection of the "topsy-turvy" year SMEs have experienced.

"It is no surprise that SMEs are feeling currency fatigue and many are worried about the impact any further volatility could have on their business," he commented.

"Unfortunately, more SMEs are going to be thrust into the currency wilderness as hedging contracts purchased before the referendum start to expire.

"An increasing amount of SMEs will be starting to feel the pain of the weaker pound, feeding directly into import price-led inflation.’

Almost one in three businesses polled admitted currency volatility had an impact on their investment decisions late last year.

Nevertheless, World First found that even amid continuing political and macroeconomic uncertainty, SMEs are continuing to demonstrate their resilience.

Whereas the average monthly currency transfer value had stood at £38,000 in Q3, the figure rose to £48,000 in Q4.

Furthermore, volumes of international trade also rose to the highest level of the year between October and December,.

Mr Cook said this shows SMEs have shook off the gloomy predictions made after the Brexit vote and adopted a global outlook.

"By thinking outside of the transatlantic box, businesses are able to harness the opportunities available on a global level," he stated.

Mr Cook added that while "an anti-globalisation rhetoric" appears to be sweeping across the west, the breadth of countries that British SMEs are trading with shows they are "embracing the prospects that trading internationally offers".

"From Portugal to Peru, UK SMEs are increasingly keen to engage in buying, selling and working across borders," he said.