Currency fluctuations have cost internationally trading SMEs £71,600 in the past 12 months due to global conflicts and unpredictable foreign trading conditions, putting further pressure on already stretched cashflow and margins.
International SME funder Bibby Financial Services’ (BFS) annual Trading Places report, based on a survey of SMEs that trade internationally, identifies the difficulties of doing business internationally in the past year.
More than two-thirds (69%) of SMEs say international trading conditions have increased pressure on their cashflow in the past 12 months.
Currency fluctuations are adding to cashflow pressures already exacerbated by late payments.
Just under a third (29%) of SMEs report late payment from overseas customers, while 26 percent have seen a rise in international customer insolvency in the past year – posing an increased risk of bad debt caused by customer non-payment.
This cashflow pressure is pushing SMEs to the brink. Seven in ten (70%) say they are at significant or moderate risk of entering administration if geopolitical tensions continue.
Theo Chatha, CFO & Managing Director of Specialist Finance, commented: “Unpredictable international trading conditions are stifling small businesses’ ability to grow and survive. Vast sums are being lost to volatile conditions, whether through currency fluctuation or more directly via the rising costs and disruption caused by the Iran War and US trade tariffs. Small businesses need the Government to help mitigate uncertainty by strengthening trade relationships with the EU and taking tangible measures to reduce trade friction. This action is needed immediately – every delay puts more businesses at risk.”
The scale of the currency losses comes amid a significant gap in FX preparedness. While over four in five (84%) of SMEs surveyed say they are confident their business understands their FX risks, 43 percent have no proactive FX strategy in place, and 49 percent say no one within the business has significant experience or training in managing one.
Theo Chatha continued: “A non-proactive approach to managing currency only puts businesses’ margins in the firing line. The businesses best placed to win amid this volatile trading environment are those with a strong FX strategy, allowing them to plan, hedge and budget with confidence – mitigating currency fluctuation and enabling growth.”
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