Many people in the UK and across the world have been stumped with Donald’s Trump emphatic win in the US elections. Soon after Donald Trump won the US elections, markets across the world including the UK plummeted. Analysts even compared the shock of Trump’s victory to another Brexit. However, Trump’s first presidential speech, which was both balanced and reassuring, helped the markets recoup from sharp losses.
Various media houses and financial experts have been quite vocal in their predictions that Donald Trump’s the president of the US can have a bad impact on small businesses in the UK. In fact, they were not happy with Hillary Clinton winning as well, stating that her tax hike plans could impair the already waning capital investments for new start-ups. In any case, since Brexit, the Sterling had dropped to the tune of 15 percent against the dollar.
The Q13 2016 Global Trade Parameter by ‘World First’, stated that UK SMEs have not done a good job of protecting themselves from the uncertainty of US elections, endangering them to a currency risk of £34.6 billion.
Businesses that purchase US dollars have reduced the length of their forward contracts, from an average of 90 business days to lesser than 70. This makes a majority of US buyers unhedged for a stretched amount of time. With 28 percent of UK small businesses trading dollars, the risk for their business can be increased if the currency moving the wrong, becomes high.
While the economic uncertainty looms large for small businesses following Brexit and US elections, business owners have to pull up their socks and prepare themselves against all eventualities. They must find the right strategy to channelise foreign cash flows better and retain profits.
The SMEs in UK are in for a bumpy ride. It becomes important to have the right foreign exchange protection. The companies will have to be well-versed with their FX exposure and have a plan to alleviate risks during times of sheer unpredictability. A solid financial tool is essential for businesses to develop strategies that can work well both on short and long-term, while exercising risk management and making cash flow transparent.
If you are looking for guidance through these uncertain times, contact Assured FD Services today on 07817 676371. We provide specialist part time Finance Director services to UK businesses, strengthening operating stability and strategising for growth.