Brexit: Foreign exchange advice for UK importers and exporters

Published by Laurence Parry on 2 November 2020

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Hamilton Court FX, a leader in bespoke currency solutions to businesses operating abroad, advises UK importers and exporters to take action now to mitigate their foreign exchange costs in the run up to Brexit.

Many businesses trading abroad are in the dark about what they should be doing to prepare financially for the Brexit deadline on 1 January 2021.

Importers and exporters across sectors are worried about the Government’s failure to provide clear detail sooner to guide them through UK and EU bureaucracy. That is the feedback received by boutique consultancy, Hamilton Court FX.

Ben Timms, Hamilton Court FX Commercial Director, said: “Our clients are frustrated over the lack of Government Brexit advice. There is no one size fits all answer here, which is why businesses need to speak to someone. Businesses are still sitting on the fence waiting for detailed Government advice on the changes to the way they import/export goods and pay for them but it’s imperative that they act now with proactive methods of hedging their currency needs so market fluctuations don’t eat their profits.”

“We are helping our clients implement proactive strategies to ensure that with as many variables as they have to deal with, they’ll know where they stand with foreign exchange. ‘Brexit fatigue’ is very real, but so is the possibility that this doesn’t get a happy ending, so covering ground that we’re all bored of may seem painful, but is time well spent.”

Hamilton Court FX’s advice for businesses

Check: 

  • What implications a large delay in receipt or delivery of inventory will have on your cashflows and any underlying foreign exchange contracts allocated to them.
  • Whether a 10% move up or down in the value of the Pound will leave you having to pay extra collateral against hedging contracts.
  • The types of hedges you’re using: Are there more suitable methods?
  • Whether businesses in your supply chain are protecting themselves against FX risk and if you would suffer as a result of any adverse effects they experience.
  • The small print

Change: 

  • A non-responsive banking relationship.
  • Terms with your suppliers – are you able to get some payment flexibility if required, rather than breach any strict terms that don’t make a Brexit consideration.

Go: 

  • Speak to people in your industry. What are they doing?
  • Act on the information you’ve got and avoid procrastination
  • Get on top of the variables that you are in control of, to reduce other distractions

Simple FX strategies that a business can implement

  • Start small, hedge 50% of what you would regularly. This lowers the potential risk, while only giving up some of the potential upside.
  • Change your product mix. Something that is happening at scale already.

Considerations for businesses with their FX product mix

  1. A lower potential obligation.
  2. Structures which allow for upside flexibility or that can deliver a level of outperformance vs. vanilla products if your risk tolerance allows for it.
  3. Trades with low or zero chance of margin call.
  4. Work with an expert to tailor a trade that aligns with your market view, while still delivering the level of protection you require.

Defining the best policy is not easy. If you need support with this, please speak with your usual Kreston Reeves contact or contact Hamilton Court FX who can help guide you through the implementation and execution of a suitable strategy.

About Hamilton Court FX

Hamilton Court FX is one of the UK’s leading providers of foreign exchange transactional advice and delivery. With clients across a range of sectors with turnovers between £5-500m and is regulated by the FCA.

Contact Ben Timms
Call: 07801 550 115

Email: bt@hamiltoncourtfx.com

www.hamiltoncourtfx.com

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