The growing uncertainty surrounding the Eurozone is causing drastic fluctuations in currency markets. How can businesses guard against this instability?
Greece’s increasingly likely exit from the Eurozone has resulted in a drastic devaluation of the euro in relation to the pound. Now being viewed as a safe haven for investors, the pound is currently up at 1.25 against the euro, and 1.61 against the dollar. This is great news for British-based companies importing from mainland Europe, however, exporters have been negatively affected. As the pound becomes increasingly expensive, UK exporters are becoming less attractive to European buyers. Given that half of UK exports are destined for European markets, a continued slide in the euro’s value could severely affect British companies.
Mitigating against Eurozone Risk Reducing spend is key for British companies looking to compete on mainland Europe. In certain cases, it may be worth, temporarily, sacrificing margin in order to remain a market leader in a specific sector. The Eurozone is an important market for British companies and it would be unwise to risk losing a foothold.
Forward hedging is also essential for any business looking to militate against currency fluctuations. By agreeing prices in advance investors are able to avoid potential future loses. There are also some positives to be drawn from the current situation. It is a great time to source products from the Eurozone and British holiday makers have a selection of cut price destinations to choose from!