International

US election adds to currency concerns for UK businesses

Praseeda Nair | 7 November 2016 | 7 years ago

US election
The US election campaign has led to a good run? for the US dollar
The US election is the latest factor contributing to global currency volatility, an issue having a significant impact on the willingness of small UK businesses to import in 2017, according to new research.

Money transfer company World First’s Global Trade Barometer? has stated that the fierce US election campaign between Hilary Clinton and Donald Trump has led to a good run? for the US dollar welcome news for UK firms selling to the US, but less positive for importers.

The study warned that, should Donald Trump win the US election on 8 November, the dollar could strengthen as a ‘safe haven currency? referring to its reputation for swift recovery following times of financial crisis and create unexpected increases in costs for the 28 per cent of small UK firms trading in the dollar.

The report also suggested that the US Federal Reserve is set to increase dollar rates by the end of 2016 meaning further costs for UK firms importing goods and services across the Atlantic.

The study revealed that 38 per cent of decision makers at small UK businesses were worried about further currency volatility over the next three months, which could increase after the US election.

The result of the EU referendum has already taken its toll on the currency market, as Brexit has caused the value of the pound to tumble to almost 20 per cent lower now than the day before the referendum.

So far, many British companies have used the fall in sterling’s value to their advantage, exporting goods from the UK at more competitive rates.

However, since the UK voted to leave the EU, the pound-to-dollar exchange rate has fallen to 17 per cent, and a weaker pound has meant that UK imports have become up to 20 per cent more expensive in the three months following the referendum.

Commenting on the volatility of currency across Europe and the US, World First’s chief economist, Jeremy Cook, highlighted the unique circumstances of the last 12 months for businesses.

calling 2016 an eventful year politically and economically would be a bit of an understatement. Small businesses have certainly felt the impact that momentous events like Brexit and an unpredictable US election have had on currency volatility, he said in a statement.

Cook added that business owners should still be braced for further impact on currency fluctuations amid continued political uncertainty.

it’s not over yet and as we head into a fraught US election, which could bring up more surprises, UK businesses need to brace themselves for a bumpy road ahead.

weve seen the pound fall against the dollar by record amounts over the past few months, and for businesses without the right foreign exchange protection this can add a lot of pressure on margins, he said.

Can the new five pound note protect your firm’s cash-flow?

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