According to the latest Global Trade Barometer from World First, international trading has shown a significant slowdown.
UK SMEs were transferring 17% less on average per currency transaction in the first quarter of this year. This is down from £48,000 in the last quarter of 2016, to £39,000.
64% of SMEs said that they didn’t make a foreign transaction in the first quarter of this year, a 28% rise from the last quarter in 2016.
30% said that their confidence had been affected by the negative effect of exchange rate movements.
The top concerns that UK SMEs have:
- Rising inflation (22%)
- Fall in consumer spending (22%)
- Currency changes (19%)
- Changes in government policies (18%)
- Business rate increases (16%)
Less international trade
International trade is on the decline. Only 25% of SMEs say they plan to export in the next quarter. This is a drop from the 33% who currently do this.
Chief economist at World First, Jeremy Cook said: “The fall in trading by UK SMEs clearly shows us that SMEs are doing less trade abroad. Higher costs of importing materials and squeezed margins are seeing businesses pull back from international trade. Whilst fewer transactions of less value might be less risky for businesses, it could have a negative impact for the UK economy going forward.”
Brexit negotiations
Over a third of SMEs have voiced their concerns over the Brexit effects on currency rates and how that will impact their businesses.
12% say they are very concerned about this. 26% say they’re worried it will become more difficult to manage currency risks.
Plans for currency volatility
Most SMEs are expecting it but 59% say they have no plans to protect themselves against currency volatility. Despite this, 37% of SMEs said that any more falls in sterling would negatively affect their business.
Cook says: “The volatility of foreign exchange markets over the past twelve months, combined with the political and economic uncertainty has made the task of approaching foreign exchange markets with clarity and confidence even more difficult.
“Rather than address the issue of currency volatility, many SMEs seem to be burying their heads in the sand. The lack of forward planning amongst SMEs is leaving them susceptible to future shocks that could have a significant impact to their bottom line – we only need to look towards June’s UK general election as another potential flash point.”
What are your top business concerns and are they affecting your trading decisions? Please share your thoughts.