Weak pound’s big impact on UK SMEs

Just over two fifths (42%) of finance directors in small to medium sized businesses in the UK say the weakness of the pound has had a serious and significant impact on their business, according to a survey released today.

Moneycorp, which commissioned the survey of 500 decision makers in SMEs across the UK, says that 30% of businesses rely on imports which on average make up 20% of their costs.

Currency fluctuation and a vulnerability in sterling therefore creates a problem for importers, particularly as 40% of larger SMEs say that they do not directly protect their exposure to currency risk.

For many, of course, the cost and volumes required to hedge currency will outweigh the benefits. Nevertheless firms with larger turnover may be missing a trick with 30% of finance directors acknowledging their lack of understanding of currency risk had hit the bottom line.

UK exporters by contrast have found a weak pound a godsend, creating new opportunities in international markets. Indeed the government is encouraging export-led recovery from recession with the UKTI (UK Trade and Investment) playing an active role.

Nevertheless, recent steep climbs against the dollar for example (up 11% in one month) and ongoing volatility mean that even exporters may be vulnerable to swift movements in currency, despite the pounds inherent recent weakness.

[Picture credit: computerjoe licenced from Flickr]