Businesses need to prepare not only for a possible no deal Brexit, but for a landscape that could be plagued by a fluctuating pound for years to come. That is the warning from one foreign exchange (FX) expert, as businesses remain on tenterhooks with the continuation of what has been dubbed as the Brexit circus.
With Prime Minister Theresa May’s Brexit deal having faced rejection three times, businesses’ concern of a potential no deal Brexit is intensifying. The situation appears even more bleak for companies with overseas interests, with the instability of the pound likely to continue for years ahead, making it one of the most troublesome issues for business leaders.
Many organisations have been losing significant amounts of money because of the depreciation of the pound since the Brexit referendum, and this remains the case with a possible no deal in sight. MPs have rejected all the alternatives to Mrs May’s Brexit plan, leaving Parliament in deadlock over the situation. May is expected to meet with Labour leader Jeremy Corbyn today, in the hope of overcoming the impasse with a revised version of her deal with the EU that can gain the support of MPs.
Paul Langley, managing director of Swansea-based FX company Godi Financial, claims this would be good news for businesses, as there would finally be a glimpse of light at the end of the tunnel with the creation of some certainty for businesses as to how the divorce will pan out. However, he is urging businesses to look ahead and plan for a future of sterling volatility, as well as the impact of a more imminent possible no deal.
He claims businesses can alleviate losses and establish some certainty during these turbulent times with better knowledge and awareness of FX and how to get the best rate. Simply accepting a standard transfer rate instead of shopping around for a better deal, for example, is one way in which businesses can save money.
Rates from specialist FX companies are often a fraction of the cost of major UK banks. So many organisations fall victim to a hidden transfer fee due to a lack of transparency from their FX service provider. With a robust FX strategy, however, financial loss can be minimised, and businesses can continue to operate without the concern of a major hit because of a shifting pound.
“It goes without saying that the parliamentary circus has resulted in further turbulence in currency markets, with sterling making several negative movements. We are not just waiting for the UK to leave the EU. Businesses must also face the transition period, where the more intricate details of the UK’s future relationship with the EU will be outlined. This will also be riddled with ambiguity and therefore impact the pound’s performance.
“There are a number of larger businesses that have put significant preparations in place, but this is not the case for SMEs further down the supply chain. Plans and their implementation cost money. Add to this loss caused by a turbulent pound and it is no surprise some businesses are struggling and concerned for the future.
“I do find it surprising that at this stage of the Brexit fiasco, so many businesses are without a sufficient FX strategy, with some not having a FX strategy in place at all. With prolonged uncertainty, it is crucial for business to be aware of how fluctuations in the currency market can influence their operations and how their rates are being managed. They need to act promptly to safeguard their bottom lines now and for the future.”