Those responsible for managing foreign exchange risk at small businesses in the UK have insufficient knowledge of how currency fluctuations can affect profits, according to research published today.
A survey of 500 finance directors at small businesses by Moneycorp, the currency broker, showed that 30 per cent acknowledged that a lack of understanding of currency risk had had a negative impact on their bottom line.
Sterling dropped sharply against the dollar, falling more than 26 per cent between September 2008 and March 2009 as fears heightened across the UK banking sector and as the Bank of England slashed interest rates.
But since March the pound has risen strongly, gaining more than 15 per cent against the dollar as UK banking stocks have recovered amid a rally in global equities.
The pound’s volatility affected 92 per cent of small businesses surveyed, with 42 per cent of finance directors saying that the impact was “significant” or “serious”.
Moneycorp said the effect of these gyrations on UK small business had been exaggerated, since 40 per cent of importers and 45 per cent of exporters surveyed did not actively protect their exposure to currency risk.
Mark Deans, dealing manager at Moneycorp, said the survey highlighted the need for small businesses to adopt a strategy to protect against currency volatility.
“When trading overseas, the priority for businesses of all sizes should be to protect against currency risk,” he said.
“In an open economy heavily reliant on imports and exports, UK companies ignore market volatility at their own risk.”
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