Exchange rates create challenging trading conditions for UK firms

UK businesses are struggling to maintain their profit margins as dollar and euro exchange rates change, a leading economist has said.

Firms in the UK are being squeezed in two ways because of changes in the exchange rate. George Buckley, who is an economist at Deutsche Bank, explained it this way when speaking to the Financial Times:

“The way sterling has moved against the euro and the dollar is not ideal, British companies import dollar-denominated raw materials and sell a large proportion of their exports to the euro-zone. It would be much better if the exchange rate movements had gone the other way.”

Those firms who pay for their raw materials in dollars effectively pay more for those materials. At the same time, if they sell to Europe, the increase in the value of the euro against the pound means that they make less profit on each item unless they put the price up.

However, falling oil prices mean that raw materials cost less. This is helping to counter some of the negative impact of the changes in the dollar and euro exchange rates, but UK firms are still being squeezed overall.

These challenging times mean that British firms are more likely to find themselves with cash flow issues, perhaps being short of the cash that they need to buy raw materials to fulfil their next order. At DJB, we are able to help with business cash flow problems using such financial services as asset financing. Please contact us to find out more and speak to one of our experienced financial advisors.

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