UK small businesses aren't prepared for foreign exchange volatility if the Federal Reserve raises rates in December

 
Madeline Ratcliffe
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Fed Chair Janet Yellen Holds News Conference Following Federal Reserve Policy Meetings
Janet Yellen is widely expected to raise interest rates in December (Source: Getty)

UK SMEs are unprepared to deal with currency volatility if the Federal Reserve raises rates in December.

While 88 per cent of small business owners said they understood the potential impacts of a US rate rise on currency markets, 70 per cent felt their business needed to be better prepared to deal with exchange rate volatility.

Just over a quarter of businesses have been seriously affected by sudden swings in exchange rate in the past, according to a survey by payments technology company World First.

Businesses with larger turnovers, more than £500m, are the least prepared, with 75 per cent saying they should be doing more to manage the risks from their foreign exchange exposure.

And, if (or when) the Bank of England follows in the footsteps of the Fed and raises interest rates in the UK, SMEs will be hit harder. 86 per cent of companies make frequent monthly payments in dollars (32 per cent) and euros (54 per cent), and 53 per cent said the strength of the pound is damaging their business’ profitability and margins.

Jeremy Cook, chief economist at World First, said: “UK SMEs remain dangerously exposed to currency market volatility at what is a crucial time in macro-economic policy.”

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