Eurozone Trading Value Plummets
Exchange rate volatility is the biggest concern for corporates in 2016, according to a report released by UK-based foreign exchange broker HiFx.
49% of HiFX’s customers saw an average 15% decrease in the value of transactions to and from the Eurozone over the last six months, whilst 42% saw an increase.
The report found that 50% were importing more products and 26% were exporting, which is increasing the value of transactions to and from the Eurozone.
11% aimed for better deals through larger transactions, whilst 8% took advantage of currency shifts and the strength in British sterling.
Chris Towner, Chief Economist at HiFX, said: “For the majority of businesses, the value of transactions being made to and from the Eurozone has nose-dived.
“Volatility in exchange rates and political unrest, underpinned by a recovering British economy are the main drivers of this.
“However, the pound was sitting very comfortably against the euro for much of 2015, so it’s positive that two-fifths of our corporate customers have been taking risks and cashing in on this by increasing their transactions.”
The value of global transactions dipped by 8% within six months and is projected to drop further.
40% of corporates increased value of imports and exports to Eurozone in the last 12 months.
Chris Towner added: “Emerging markets have long been positioned as the land of opportunity; the obvious place to take your business abroad if you’re planning overseas expansion.
“But this isn’t reflected in the current global market. Corporates are expanding beyond the boundaries of emerging markets and trading with economically advanced nations such as the US and Australia, as well as developing countries with new infrastructures.
“It’s no secret that political unrest is another turn-off for corporates. Our report found 31% of our corporate customers find a weaker market makes trading more difficult.
“And 18% find ethically their business is more than likely to pull out of deals and stop trading until unrest has been resolved.
“This has been really evident in Greece, where a shattering economic crash has caused the number of foreign transactions to drop by 40% in the last year.”
However, in the event of ‘Brexit’ – that the UK leaves the European Union – a fifth of corporates would reduce exports to the Eurozone, although this is tempered by the belief that the value of global exports would increase if Britain were to leave the euro.
Towner concluded: “With exchange rate volatility rated the highest concern amongst corporates this year; we need to see stability in the Eurozone in order for British businesses to restore their faith in overseas trading.
“Whether you run a small import/export business which wants the quickest, easiest and most cost-effective way to make international payments, or you’re the CFO of a larger business that requires highly tailored strategic hedging advice with fast cost-effective execution, currency rates are important.
“Currency volatility differs greatly from one country to the next so companies trading abroad need to be aware of the currency movements in the areas that they deal with.
Towner concluded: “The currency markets have the ability to create tremors that can undermine national economies let alone the profits of individual businesses. At the very least companies should be holding their high street banks to account on the exchange rates offered.”