UK SMEs that trade internationally have been hit hard by currency fluctuations linked to global conflicts and uncertainty related to tariffs.
According to the annual Trading Places report from Bibby Financial Services, currency volatility has cost internationally trading SMEs £71,600 over the past year, putting additional pressure on cashflow and margins that have already been under severe strain.
The report revealed that 69 per cent of SMEs that trade internationally have found that cashflow has come under increased pressure due to international trading conditions in the past year, adding to cashflow issues that have already been impacted by late payments.
Close to a third of respondents (29 per cent) said that they have faced late payments from overseas customers, while 26 per cent reported a rise in international customer insolvencies, leading to a higher risk of bad debt from non-payment.
The cashflow pressures linked to these issues are considerable, with 70 per cent saying they were at significant or moderate risk of falling into insolvency should geopolitical tensions persist.
Theo Chatha, Bibby FS Group CFO and MD Specialist Finance, commented: “Unpredictable international trading conditions are stifling small businesses’ ability to grow and survive. Vast sums are being lost to volatile conditions, whether through currency fluctuation or more directly via the rising costs and disruption caused by the Iran War and US trade tariffs.”
“Small businesses need the Government to help mitigate uncertainty by strengthening trade relationships with the EU and taking tangible measures to reduce trade friction. This action is needed immediately – every delay puts more businesses at risk.”
The mounting issue comes at a time when SMEs are demonstrating a significant lack of foreign exchange (FX) preparedness. Despite 84 per cent saying they are confident that their business understands FX risks, 43 per cent of respondents admit to not having a proactive FX strategy and 49 per cent say that they don’t have anyone within their organisation with significant experience or training in managing an FX strategy.
Chatha added: “A non-proactive approach to managing currency only puts businesses’ margins in the firing line. The businesses best placed to win amid this volatile trading environment are those with a strong FX strategy, allowing them to plan, hedge and budget with confidence – mitigating currency fluctuation and enabling growth.”
