Now is the time to start protecting your business’s foreign currency deals…..

Opinion Piece by Graham Carrick (COO of Assure & writer). This is not advice from Assure Hedge

First things first, anyone who says that the word “BREXIT” doesn’t make them want to fill their ears with cement is a straight out lying. We’re now in year 3 since that monstrosity of a word was coined so fingers crossed we will only have to listen to it for another 10!

With the mess now in full flow, the ones with the most to lose out of all this, exporters, are now being warned that they need to “act fast” to protect their cash reserves after the calamity of Theresa May’s farcical crunch vote in the British Parliament on her proposed withdrawal agreement with the EU.

The sad reality is that the British parliament is now well and truly totally and hopelessly deadlocked and it looks like there is no majority for any deal and sadly this shambolic political uncertainty is massively increasing our chances of seeing a disorderly, very hard Brexit. As I’m sure you’ve seen, this will leave exporters, and Irish ones in particular, very badly exposed, and they’ll need to act fast to ensure they protect themselves during what may be a period of hideous turmoil. In other words, the proverbial s**t is very likely about to hit the fan!

The Bank of England, in December, published its projections of what could happen in the event of a disorderly Brexit, and to put it loosely it made for stark reading. The everlasting Governor of the Central Bank of England/Britain Mark Carney made his much-quoted statement that:

the value of Sterling could collapse by a whopping 25% to under €1, unemployment could rise to over 7.5% and inflation could rise to 6.5%.

The trust is that all this is particularly bad news, especially Irish Businesses exporting into the UK, who could see the value of their exports fall significantly in the months ahead should economic forecasts worsen and sterling’s value plunge. The Irish Exporters’ Association has encouraged all exporters to conduct impact assessments to gauge their exposure to Brexit, yet the reality is that — incredibly — even at this late stage with only weeks to go (unless it’s delayed that is), no one really knows how it will play out.

It’s important to note that a hard Brexit would not necessarily help importers into Ireland either as, unfortunately, it’s a double edged sword with the potential for high customs duties on all goods, a large amount of bureaucratic red tape and, of course, a hard border could all result in significant supply chain issues that would hinder trade coming into the country.

It’s certainly a very uncertain time, and businesses completely need certainty in order to plan for the future. One way in which they can do that is by limiting their exposure to wild currency fluctuations. Anyone who’s ever exported anything, ever, will be fully aware that you simply don’t have the time to deal with long-winded foreign exchange negotiations with brokers and banks; you need a simple solution that protects the margin on the deal, as otherwise, you’ve no idea if the deal will make any money.

According to the Central Statistics Office, nearly 3,500 Irish exporters — or almost 40% of all goods exported — traded exclusively with the UK in 2016, which is an eyeopener, to say the least. As would be expected SMEs made up the large majority of these businesses, at a hugely significant 93%. And fancy stat #2, businesses with fewer than ten employees comprised over half the number of firms exporting to the UK, showing cottage and micro businesses are exporting in massive numbers.

The bleak outlook over Brexit is shared by industry leaders alike. According to a to study ahead of the Deloitte and Enterprise Ireland CEO Forum in November 2018, a whopping 95% of CEOs said they believed Brexit would have a negative impact on the economy, while almost 60% said they believed a no-deal Brexit would have a negative impact on their own business. That seems pretty obvious!

Against the backdrop of chaos and uncertainty in the British parliament, it is vital now more than ever that exporters safeguard themselves in every possible way to give themselves the best chance of riding out this very very long lasting Brexit storm.

Check out the Assure Hedge Brexit Protection product if you’re looking to protect your exports or GBP business. You can protect as little as £10,000 and up to £10m or vice versa if you’re a UK business and want to protect your Euro deals.

You Need to Act Fast to Survive This Brexit Calamity was originally published in Assure Hedge on Medium, where people are continuing the conversation by highlighting and responding to this story.