# UK Firms Adapt to ‘New Normal’ of International Trade Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-03-10 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: SMEs Increase Prices After Brexit Currency Slump Meta Description: Find out how UK businesses are adjusting their international trade strategies in the face of Brexit-related Sterling devaluation. Learn more! URL: https://financedigest.com/uk-firms-adapt-to-new-normal-of-international-tradehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/young-stylish-businessmanz-1736844106363-compressed.jpg) - _35% of SMEs have increased prices as a response to post-Brexit Sterling slump_ - _54% of firms rank currency risk as biggest challenge to conducting international business_ A new research report released today by AFEX, one of the world’s largest non-bank providers of foreign currency and risk management solutions, reveals a sharp increase in the number of UK importers and exporters re-evaluating their international trade strategies following the June 2016 EU referendum. AFEX’s third [Currency Risk Outlook](https://sf-asset-manager.s3.amazonaws.com/95763/412/769.pdf) survey questioned more than 650 financial decision makers globally at SMEs engaged in international commerce about their attitudes towards global trade, foreign exchange risk and their methods of managing it. Over two-thirds (71%) of UK respondents said their currency [risk mitigation strategy had been affected by the outcome of the Brexit](https://www.financedigest.com/brexit-the-risks-to-the-city-and-fintech-have-never-been-greater.html "BREXIT: THE RISKS TO THE CITY AND FINTECH HAVE NEVER BEEN GREATER") vote, which has seen Sterling fall by over 18% in value against the U.S. Dollar. Currency volatility affected the business operations of one in three (34%) respondents in 2016, compared to just 19% that said the same in 2015. The most common impact was on international growth, with 13% saying they had cancelled [their growth plans](https://www.financedigest.com/plan-c-uk-pm-johnson-not-planning-further-covid-rules-despite-omicron-growth.html "Plan C? UK PM Johnson not planning further COVID rules despite Omicron growth"). Nine per cent said they had reduced the size of their business as a result of currency volatility while 6% have reduced headcount. A number of respondents have also benefitted from the weaker value of Sterling, with 10% [saying they had accelerated their growth plans](https://www.financedigest.com/ecb-unicredit-clash-over-capital-plans-russia-presence-ft-says.html "ECB, UniCredit clash over capital plans, Russia presence, FT says") as a result. Post-Brexit currency volatility has also impacted the [prices firms](https://www.financedigest.com/oil-prices-stay-firm-on-fuel-demand-despite-covid-19-surge.html "Oil prices stay firm on fuel demand despite COVID-19 surge") are charging for their goods or services. Among companies surveyed, over a third (35%) have increased the price of their goods or services as a result of the devaluation of Sterling resulting from the June 2016 referendum result. A further 17% said they plan to increase prices within the next three months and 14% plan to introduce [price hikes by the end of the year](https://www.financedigest.com/mr-kipling-maker-premier-foods-to-stop-price-hikes-this-year.html "Mr Kipling maker Premier Foods to stop price hikes this year"). In recent weeks [companies including Microsoft, Apple, Sonos and Tesla have all announced price increases in the UK citing currency fluctuations as a factor](https://www.financedigest.com/microsoft-videogame-testers-form-companys-first-u-s-union.html "Microsoft videogame testers form company’s first U.S. union"). Firms are anticipating continued volatility throughout 2017, with 71% saying currency volatility poses the biggest challenge to mitigating currency risks in the [year ahead](https://www.financedigest.com/the-year-ahead-top-payments-trends-to-watch-out-for-in-2022.html "The year ahead: Top payments trends to watch out for in 2022"). Despite the increased uncertainty, the majority of those polled [remain committed to global commerce](https://www.financedigest.com/global-emi-shielding-market-significantly-hit-by-lack-of-consumer-demand-scenario-post-covid-19-crisis-likely-to-remain-gloom.html "Global EMI Shielding Market Significantly Hit By Lack Of Consumer Demand; Scenario Post Covid-19 Crisis Likely To Remain Gloom"), with 83% anticipating maintaining or increasing their international trade levels in 2017. “Uncertainty and concerns over currency volatility dominate this report with the fallout from the EU referendum looming large for UK [importers](https://www.financedigest.com/china-nov-export-growth-slows-but-imports-accelerate.html "China Nov export growth slows but imports accelerate") and exporters,” said Jan Vlietstra, Chief Executive Officer for AFEX. “The steep decline in the value of the pound in the immediate aftermath of the vote and its [sustained](https://www.financedigest.com/metal-cans-and-glass-jars-market-demand-from-food-industry-to-grant-sustainable-business-prospects.html "Metal Cans and Glass Jars Market – Demand from Food Industry to Grant Sustainable Business Prospects ") weakness since has made many businesses look closely at how they’re doing business internationally. These findings reveal that many firms are looking at ways to factor in this uncertainty and are revisiting their business models be that by changing their pricing, renegotiating their [contracts or more actively](https://www.financedigest.com/euro-zone-business-activity-contracted-again-in-august-pmi.html "Euro zone business activity contracted again in August -PMI") managing their currency risks.” More than half (54%) of all those surveyed now cite [currency risk](https://www.financedigest.com/evergrande-jitters-pull-risk-currencies-lower-dollar-gains-on-safety-bid.html "Evergrande jitters pull risk currencies lower, dollar gains on safety bid") as the number one challenge when conducting business internationally. This is up from 43% [since the last time the](https://www.financedigest.com/sterling-slides-below-1-15-for-first-time-since-2020.html "Sterling slides below .15 for first time since 2020") report was conducted in mid-2015 and eclipses other considerations such as accessing the right customers or suppliers (17%), language barriers (9%) and legal/regulatory differences (4%). Managing FX risk The proportion of firms hedging their currency risks frequently or infrequently has increased to 53%, up from 31% before the referendum. This means that UK firms more commonly use hedging tools than their counterparts in Australia (45%), the U.S. (28%) and Canada (22%). The trend looks set to continue with more than one-in-three (37%) firms planning to [use hedging strategies](https://www.financedigest.com/fx-hedging-strategies-to-protect-your-business.html "FX hedging strategies to protect your business") more in the year ahead than last year. Only 6% said they intend to [cut back](https://www.financedigest.com/asos-reports-first-half-loss-as-shoppers-cut-back.html "ASOS reports first-half loss as shoppers cut back") on their hedging strategies. The [primary driver for this increase is market](https://www.financedigest.com/digitized-exclusivity-to-be-the-epicenter-of-primary-peritoneal-cancer-therapeutics-market.html "Digitized Exclusivity to be the epicenter of Primary Peritoneal Cancer Therapeutics Market") uncertainty, with 51% of respondents citing this as their main reason. Around one-third (32%) also cited [central bank uncertainty](https://www.financedigest.com/central-banks-opt-for-shock-and-awe-to-tame-inflation.html "Central banks opt for shock and awe to tame inflation"). “The massive [plunge in the value of Sterling](https://www.financedigest.com/sterling-plunges-to-all-time-low-in-scathing-appraisal-of-fiscal-plan.html "Sterling plunges to all-time low in scathing appraisal of fiscal plan") served as a wake up call for many businesses, some of which have seen profits entirely wiped out by currency fluctuations,” said Stuart Holmes, EMEA General Manager for AFEX. “Since last June we’ve received a huge number of enquiries from firms that have never considered actively managing their currency risks before. There are services and tools that enable firms of all sizes to understand and [manage their exposure](https://www.financedigest.com/enhancing-credit-exposure-management-through-graph-analytics.html "Enhancing Credit Exposure Management Through Graph Analytics") so they can take full advantage of the opportunity international trade presents.” Fifty-five percent are planning to make use of forward contracts – contracts that allow firms to lock in a price for a currency exchange up to 12 months in advance to provide certainty and protect a business’s [bottom line](https://www.financedigest.com/how-high-performers-can-increase-a-bottom-line.html "How high performers can increase a bottom line") – while a quarter (26%) plan to pass currency risks onto their suppliers or customers and 9% intend to use more sophisticated options products. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---