The impact of a weakened pound is being felt unevenly across British businesses, with higher import prices affecting smaller firms most.
All UK businesses that import raw materials or finished goods have seen the prices they pay their foreign suppliers increase since the EU referendum in June.
Although everyone has been feeling the impact of the price spike, it is small and medium-sized enterprises (SMEs) who bear the brunt, with many having to reduce their imports, according to new figures form FEXCO Corporate Payments.
In July, the total number of foreign currency purchases made by SMEs fell by 7% on the same time last year. However the average transaction size was 29% less than in July 2015 as companies sought to rein in spending. In August the picture had recovered a little – these figures being 5% lower and 11% lower respectively.
With two successive months of reduced import spending, this suggests that SMEs are growing increasingly wary of importing.
Comparing figures from small businesses and large corporates, the number of foreign currency transactions made in July by large businesses actually rose by 7% on the same time last year, while public sector organisations made 6% more transactions than in July 2015.
David Lamb, head of dealing at FEXCO Corporate Payments, explained: “Our research indicates that large companies and public sector organisations are much more likely to use hedging strategies when buying from overseas. Products like forward contracts allow them to lock into a favourable exchange rate and protect themselves against adverse currency movements.
Lamb continued: “However small firms that don’t hedge against this risk leave themselves open to costly dips in the Pound’s value. Our data shows they are trying to mitigate the risk by making smaller import purchases than they did at this time last year – but this bodes ill for their ability to grow.”
This echoes recent news that almost one quarter of small businesses suffering post-Brexit as they already feel that the devaluation of the pound has hindered their business. Exports don't look much better either, as SMEs are missing out on international sales by not exporting abroad. Ultimately, small businesses appear set to be hit hardest by Brexit.