How can you protect your business from market volatility during Brexit?

Brexit has dominated the UK’s political and economic landscape for more than two years now, and with an end in sight, it’s a good time for small-to-medium businesses to start thinking about how to protect against market volatility.

If there’s one thing we’ve come to expect, it’s volatility. The Pound dropped to a 31-year low after the referendum in 2016, and has since bounced around the market in response to Brexit headlines.

This uncertainty is shown to have had significant impact over the last quarter, with the Pound sitting at $1.30 in October 2018, only to fall 1.26 by December that same year. As a similar pattern was observed with the Euro, we’re heading into 2019 with a sense that there will be challenges for businesses working with companies in Europe as a deal is yet to be made.
Brexit negotiations

Other options being discussed include a second referendum, a ‘Norway Plus’ deal - which would see Britain achieve a similar deal to Norway with a few additional bells and whistles - and even revoking Article 50 altogether, which the European Court has confirmed categorically that Britain can do unilaterally. 

The OECD predicts that growth in the UK will grow slightly in 2019, but then drop in 2020 - although this is predicated on the UK having a smooth Brexit. If there is a no deal Brexit, the OECD said: “Temporary measures will be needed to cushion the economy and support displaced workers.”
This means that monitoring the market during this time can be tricky, as the slightest bit of good news can cause a sterling rally, and conversely, any bad news can result in a drop. So using this to your advantage is the key. As an international business making or receiving payments across multiple continents and different currencies, risk management strategies are a great way to stay ahead of the curve. 

You could use a forward contract (buy now, pay later) to lock in a rate for a portion of your 1-3 month expected exposure and gain more certainty on foreign currency exchange. You can also use spot contracts (made at the current rate of exchange) for a portion of your currency to allow flexibility and to take advantage of any favourable market movements.

How can you be prepared when volatility strikes?

Talk to a currency specialist about how your business can gain control over volatile markets and help protect your bottom line with a range of transfer options. OFX are available 24/7 on corporatelondon@ofx.com or (+44) 207 614 4195.

The OFX Currency Review assesses the current and future market movements of the major currencies, and its latest release provides insight into how the Pound will continue to perform in the wake of huge political uncertainty.

Download the OFX Currency review

The OFX Currency Review assesses current and future market movements of major currencies. The latest release provides insight into how the Pound will continue to perform in the wake of huge political uncertainty.