WorldFirst Global Trade Monitor: SMEs Have Been Negatively Impacted by Brexit Decision

World First, an international Fintech business in the Forex and money transfer space, is out with their Global Trade Barometer report and according to their perspective it’s not all good. World First says that UK SMEs are taking it on the chin as post-Brexit fallout is harming them. Simultaneously, UK SMEs have remained stubbornly resilient.

According to their research;

  • UK SMEs are feeling the effects of a weaker post-referendum sterling as hedging contracts start to expire in Q4
  • As pre-Brexit hedges come to an end, almost half of all businesses admit to being worried about currency volatility
  • Over a third of UK SMEs have been negatively impacted by Brexit as the post-referendum reality of a weak pound followed by cost-push inflation takes hold, a new report by World First, the international transfer experts, finds.

Jeremy Cook, Chief Economist at World First, commented on the post-referendum effect of a weaker sterling on UK SMEs;

“After the topsy-turvy year behind us, it is no surprise that SMEs are feeling currency fatigue and many are worried about the impact any further volatility could have on their business. Unfortunately, more SMEs are going to be thrust into the currency wilderness as hedging contracts purchased before the referendum start to expire. An increasing amount of SMEs will be starting to feel the pain of the weaker pound, feeding directly into import price-led inflation.”

World First says that despite ongoing political and macroeconomic uncertainty, UK SMEs continued to show resilience at the end of the year with volumes of international trade reaching record amounts since World First started tracking the data in Q1.

During Q4, businesses made currency transfers worth an average of £48,000 in a typical month; a significant 26% jump compared to the average monthly transfer value of £38,000 in Q3. The proportion of SMEs engaged in international trade also increased over the quarter with those who did not make any foreign currency transfers at all dropping from 47% in Q3 to 41%.

The increase in international payments by SMEs was driven by activity in emerging markets. Between Q3 and Q4, payments to New Zealand rose by 69%, Mexico by 56% and Turkey by 39%, amongst others. Contrastingly, the number of UK SMEs trading with Europe and the US slowed slightly (7% and 1% respectively) as the first effects of the weak pound began to trickle through.

“Despite the predictions of doom and gloom following the EU referendum, UK SMEs remain buoyant with more adopting a global outlook and looking further afield for suppliers and customers. By thinking outside of the transatlantic box, businesses are able to harness the opportunities available on a global level,” says Cook. “The breadth of countries that UK SMEs trade with shows that even though we are seeing an anti-globalisation rhetoric sweep across the West, businesses are embracing the prospects that trading internationally offers. From Portugal to Peru, UK SMEs are increasingly keen to engage in buying, selling and working across borders.”

In the week leading up to the US presidential election in November, the number of UK businesses trading in America who purchased hedging products jumped by over 188% compared to the week before. This suggests that more SMEs have learned their lesson from the fallout of the EU referendum and chosen to protect themselves from future currency volatility during times of political uncertainty.

 “As we await further political change from the upcoming elections across Europe in the Netherlands, Germany, and France, the message is clear for UK SMEs trading internationally – volatility isn’t over yet,” explains Cook.

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