UK Businesses Plan to Reduce Use of the Euro by 7.8%: East & Partners

Research shows corporates "are clearly looking to new international markets to trade with."

Use of Euros by UK corporates is set to slow dramatically over coming years as businesses look beyond the EU and adopt a more internationalist stance.

According to the latest Business FX Payments Market Analysis from East & Partners - a global business banking market research and analysis firm - businesses in the UK plan to reduce their use of the Euro by 7.8%.

East & Partners argue that UK businesses are "definitely gearing up for the post-Brexit world".  

Small businesses are in the vanguard of this drive but lower corporates are aiming to follow suit.

The research shows that the biggest switch away from Euros is being among lower corporate companies who forecast they will reduce their Euro use by 23.1%.

"As this reduction in the use of the Euro for international trade takes place, UK businesses are clearly looking to new international markets to trade with," say East & Partners.

While small increases in the use of the US Dollar (1.2%) and Chinese Renminbi (2.7%) are forecast, the biggest increase will be in the use of other currencies at 37.7%.

"The biggest increase in the use of other currencies is planned by SMEs who are set to increase their usage by 51.9 percent.  Micro businesses closely follow, forecasting they will increase their other currency use by 34.1 percent, while lower corporates plan to increase by 30.3 percent," say East & Partners.

FX Risk Management Sophistication

The volatility in Pound Sterling following the referendum on European Union membership in June 2016 has seen businesses become increasingly attuned to the need to hedge against FX risk.

Research by East & Partners shows that in the six months prior to the UK’s referendum vote in June 2016 to leave the EU, 100% of lower corporates reported the occasional use of FX hedging products such as FX Forwards and Options.

Since then, the level of regular use, as opposed to occasional use, of such FX products, has continued to grow and reached nearly 56% with FX Forwards in the second half of this year.

"This FX risk management sophistication is not exclusive to lower corporates with the use of such products showing a continuing growth in usage among Micro businesses and SMEs," say East & Partners.

It is pointed out that the adoption in the UK is not at the high levels seen in some markets, such as New Zealand where more than three-quarters of importing and exporting SMEs use FX hedging.

However, "UK businesses have the lead on other markets, particularly in Europe where both France and Germany lag behind the UK in FX risk management," say East & Partners.

Looking ahead, the advisory firm say there’s much that banks and other providers can do to aid and serve UK businesses in meeting the uncertain challenges that face them over coming months.

"But UK businesses are clearly not sitting around to wait for it to happen.  A significant opportunity awaits those who can better serve business in enabling their international trade more effectively as they look to markets outside the EU and guide them through the upcoming uncertainty.  If banks don’t up their game other providers and new entrants are increasingly appealing to business," say East & Partners.

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