Small firms in the UK are losing millions as a result of the continuing decline of the sterling against the dollar, new research from World First has suggested.
The foreign exchange broker calculated that, for every 1% fall in the sterling-dollar exchange rate, UK small and medium firms lose £8.4m, as half of UK SMEs fail to protect themselves against foreign exchange fluctuations.
Failing to hedge against movements in exchange rates can mean that the value of transactions can be hit dramatically. World First said that the pound’s spectacular decline against the dollar may have turned profitable deals into loss-making ones.
Alex Sullivan, head of corporate foreign exchange at World First said that there is still worse to come.
“Although we are bullish for sterling in the long term we believe that the pound may weaken further against the dollar in the coming weeks and many market commentators are now anticipating a push below $1.50 with some predicting a rate as low as $1.40 to the £1.”
Sullivan accused small firms who are not protecting themselves against currency fluctuations of “gambling with the future of their companies”.
“With the recession now well and truly kicking in, any SME that isn’t protected against further weaknesses in the pound may be heading for disaster.”
© Crimson Business Ltd. 2008