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Brexit debate hitting businesses on the bottom line

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Nearly two thirds (64 percent) of medium to large firms say their business has been affected adversely by referendum uncertainty. Yet three quarters (73 percent) of CFOs accuse the government of underestimating the referendum’s impact on business. In a Censuswide survey* of CFOs and key decision makers in UK firms with a turnover of £20m or over, 64 percent of respondents said their business had been adversely affected by the Brexit debate. In London, an overwhelming 87 percent said their bottom line had been hit. Many firms were scathing of the government’s response too, with three quarters (73 percent) accusing Westminster of underestimating the toll taken on businesses by the referendum uncertainty. 

Looking ahead to the likely implications of a Brexit, 45 percent of respondents feared that it would be harder to export to the EU if the UK withdrew from the European club. A third (34 percent) felt their profit margins would decrease, and a similar number (34 percent) feared that innovation at UK businesses would fall due to a lack of EU funding. Fewer CFOs expected a Brexit to have a positive impact on their business, with just 17 percent believing their profit margins would increase, and 19 percent feeling they would see tax reductions in a non-EU UK. Fewer than a fifth (19 percent) felt their business would be unaffected by a Brexit. Among those who feared a Brexit, there was marked regional divide, with businesses in London the most likely to envisage negative consequences from a UK withdrawal from the EU. For example, 51 percent of London-based firms worry that it will be harder to export to the EU following a Brexit, double the proportion in North West and South West England (25 percent respectively). There was also a strong demographic split, with more than three quarters (77 percent) of CFOS and decision makers aged under 35 predicting that exporting would be harder post-Brexit, while fewer than half as many of those aged 55 and over cited this as a concern (35 percent).

However many exporters have emerged as winners from the sharp fall in the Pound triggered by the uncertainty over the UK’s future – with 46 percent of firms that export reporting an increase in overseas demand since the referendum was confirmed at the end of February. David Lamb, Head of Dealing, FEXCO Corporate Payments, comments: “The Pound began 2016 by falling against most major currencies, and slipped by nearly 5 percent against the Euro and almost 4 percent against the Dollar during the two months after the referendum was announced. “Though it has since rallied a little, Sterling’s depreciation has given an unexpected shot in the arm to many British exporters, whose goods and services have suddenly become cheaper for overseas customers.”

“However a clear majority of medium to large British businesses feel the net effect of the uncertainty caused by the referendum has hurt their bottom line. Importers are among the most likely to be hit, as the cost of what they buy from abroad has risen dramatically.  In the current climate of tight margins and volatile exchange rates, a sudden shift in the value of the Pound can make the difference between profit and loss on a business deal. Failure to fix an exchange rate can work in a company’s favour if it’s lucky, but with the stakes so high, it’s unwise to leave it to chance. Failure to do so can leave an importer as a hostage to fortune. It’s a quite unnecessary risk too, as foreign exchange specialists like FEXCO now offer an array of strategies to help companies hedge against the possibility of adverse currency movements.”

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