The political in-fighting of Brexit is continuing the weigh heavily on the nation, especially for businesses who rely on their neighbours for their main import and export needs. So what can businesses do in the wake of all this uncertainty and risk?
What is happening with Brexit?
As the Brexit saga carries on in the UK, drawing out an almost three-year decision-making process, parliament seems all but but paralysed in terms of reaching a decision.
This has lead to the EU granting the UK an extension until the 31 October, 2019 in which UK Prime Minister Theresa May must come to a decision with the British parliament to avoid crashing out of the EU without a deal.
How does this impact businesses today?
The impact of this uncertainty cannot be understated, further delays mean that households and businesses remain hostage to the crippling economic uncertainty that has already been plaguing the UK since the referendum in 2016.
In terms of currency movements, on June 22, 2016 – the day before the EU referendum – the pound was trading at £1.30 against the euro. By July 8 that year, it was down at £1.16, and has been bouncing around at that rate ever since. Every new headline shows how volatile the pound is in response to any Brexit movements.
Similar, the pound fell nearly 20 cents against the US dollar to just under £1.29 after a comfortable period at £1.47 during June 2016. Overall, while the impact of Brexit negotiations is having less of an impact in other areas of the economy, the pound has still lost about 10% of its value since the day before the UK voted to leave.
Along with the lack of certainty at the moment, the impact these fluctuations have on prices impacts importing and exporting is also evident. Suppliers in the EU are more expensive to trade with, yet the cheaper pound makes exports more attractive to overseas buyers. This means businesses working with EU partners will need to be more creative in their approach moving forward.
How can businesses prepare in this age of uncertainty?
There are several ways to stay ahead in the meantime. One way is to work with a currency strategist who can offer tools in risk management. The currency specialists at OFX can offer tools like Forward Exchange Contracts, which allow you to lock in a favourable exchange rate and trade it at a later date. You can also use tools like the OFX Daily or Weekly Market Commentary or Rate Alerts to stay ahead of the game when it comes to currency movements.
Another method is look outside the EU to other locations where you can get your suppliers and/or customers. While the uncertainty of Brexit and its impact cannot be understated, it does allow for businesses to look outside their typical supply chain, which might not have been done otherwise. This provides the opportunity to broaden horizons and potentially increase profits.
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