hedging

In September 2017, the Bank of England intimated that it could move to raise interest rates for the first time in more than ten years. The following trading day saw the value of sterling rush higher and SMEs moved quickly to lock in stronger sterling exchange rates through hedging contracts.

On the 15th September, the day following Bank of England meeting minutes, there were 4.4 times more hedge trades placed than the Q3 daily average, and 4.0 times more hedge trades than the six-month average.

Jeremy Cook added: “This shift in attitude and trading strategy among SMEs could have been prompted by a number of different factors: less certainty around profit margins and sales estimates, reluctance to commit funds to financial contracts or a broader withdrawal of appetite for reaching overseas markets. We believe the latter argument is the most likely.

“Our data suggests the government’s hopes of a post-Brexit international trade boom with markets far and wide is either misplaced or that current policy is insufficient to incentivise this behaviour.”

Fintech solution

In response to the changing economic climate, the fintech industry has recently seen a surge in the number of innovative payments platforms created with the aim of simplifying the payments process for small businesses.

WorldFirst launched its World Account earlier this year, an international multicurrency payments platform for businesses that find it difficult to manage their overseas payments through traditional banks.

Bryan Black, co-founder of Outdoor Anywhere, a small UK-based business that sells outdoor sports kits to customers, said: “Having complete control and simplicity in setting up transactions while being able to pay out suppliers is something I’ve needed for a while. With World Account, all these issues are solved, and there is one less barrier to international trade.”