Foreign exchange (FX) market guide predicts increased risk of failure for UK businesses in 2023

A foreign exchange (FX) market guide published by iBanFirst, a global financial services provider, shows that UK market volatility is increasing foreign exchange risk, making it more costly for UK businesses to make international payments. 

Market volatility is being caused by a weakened economy in COVID-19 and Brexit, the high likelihood of prolonged recession from 2023 and high inflation. The Bank of England expects GDP to be 1.75% lower in 2025 than it is today. Inflation is out of control, predicted to peak between 13% and 18% in 2023. Although the Commodities Future Trading Commission report showed that the British pound has mostly withstood Brexit, the currency is expected to depreciate in the coming months. 

As a result of the increase in FX risk, UK businesses are at a high likelihood of failure in 2023 due to FX costs associated with international payments that reduce profitability and competitiveness. 

The guide presents a solution for businesses to manage foreign exchange risk using a hedging strategy. It's essential that businesses implement this to avoid FX costs, maintain sales margins and secure a price budget to prevent the renegotiation of contracts.

Commenting on the FX market guide, Pierre-Antoine Dusoulier, CEO at iBanFirst said: "For any business that deals with international payments, currency risk should not be overlooked. A single fluctuation can expose companies to various risks in terms of import flows, manufactured goods, or international expansion."

"Awareness of market movements will benefit businesses of all sizes, particularly those that operate with cross-border payments. Developing strategies to minimise foreign exchange risk in the face of market volatility is key for business resilience. To protect themselves, international businesses should adopt an appropriate hedging strategy."

"The guide provides businesses with an overview of the global macroeconomic outlook and the potential impact on major currency pairs, presenting on anticipated risks of fluctuations businesses can face in 2023."