On Wednesday (March 29), the U.K. formally began its exit from the European Union by triggering Article 50, which is likely to have widespread impact across markets. For SMEs, the risk associated with Brexit may be especially large, according to Money Mover.
The cross-border payment company warned small businesses Wednesday to mitigate against the risk of Brexit by encouraging U.K. SMEs to lock in exchange rates for upcoming overseas payments in anticipation of volatility.
“Britain’s small businesses are facing unprecedented levels of uncertainty in light of the U.K.’s vote to leave the European Union,” said Money Mover CEO Hamish Anderson in a statement. “Many small British businesses make invoice payments, pay salaries and manage their treasury accounts overseas.”
He added that some services, like those offered by Money Mover, allow a small business to lock in an FX rate to mitigate against fluctuations.
The company cited its own research that found an SME making 12 payments a year of £50,000 (about $62,000), locking in FX rates through services like Money Mover’s, could save £17,580 (about $22,000).
Last year Money Mover released a report that concluded U.K. SMEs spend about $5.8 billion in hidden bank fees related to cross-border transacting.
Analysts have been warning SMEs about FX fluctuation since talk of Brexit began. Last year Western Union Business Solutions released new services for small businesses looking to hedge and mitigate against foreign exchange volatility. Analysis from WUBS found that the majority of SMEs weren’t actively strategizing to leverage the strength of their own local currencies.
Separate analysis from East & Partners found that only about a quarter of SMEs were prioritizing FX risk mitigation, a figure that shrinks when focused only on U.S. small businesses.
“Clearly, there is more sophistication in how corporates are dealing with these issues,” said East & Partners Europe Head of Client Services Simon Kleine at the time. “The trend in France is going in the same direction, but clearly, British firms, probably due to the focus on currency trading in London, are slightly further ahead.”