Currency fluctuations have cost internationally trading SMEs an average of £71,600 over the past 12 months, according to Bibby Financial Services.
The funder’s annual Trading Places report found that global conflicts and unpredictable overseas trading conditions were putting further pressure on cash flow and margins.
More than two-thirds (69%) of the SMEs surveyed said international trading conditions had increased pressure on their cash flow during the past 12 months.
Currency volatility has added to pressures caused by late payments. Just under a third (29%) of SMEs reported late payments from overseas customers, while 26% had seen an increase in international customer insolvencies over the past year, raising the risk of bad debt.
Seven in 10 SMEs (70%) said they were at significant or moderate risk of entering administration if geopolitical tensions continued.
Theo Chatha, chief financial officer and managing director of specialist finance at Bibby Financial Services, says: “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 scale of the currency losses comes despite 84% of surveyed SMEs saying they were confident that their business understood its foreign exchange risks.
However, 43% had no proactive foreign exchange strategy in place and 49% said nobody within their business had significant experience or training in managing one.
Chatha continues: “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.”
