The value of the British Pound has dropped significantly in recent years and taken a significant tumble following Kwasi Kwarteng's mini budget. It is now at an all-time low. This is of course a cause for concern for businesses in the UK, particularly small businesses who may not have the same resources as larger businesses to weather such an economic storm. In this blog post, we'll take a look at what this development means for small businesses in the UK and what conversations are taking place in board rooms across the country at the moment.
As we all know, Britain voted to leave the European Union back in 2016 and since then, there has been much uncertainty surrounding what form Brexit will take and what effect it will have on British businesses. These ongoing concerns have led to a decrease in investment and growth in the UK economy, which has contributed to the current situation with the value of the pound.
Small businesses are often hit hard by economic downturns such as this as they don't have the same resources as larger businesses to weather such storms. This can lead to job losses and even business closures. That's why it's so important for small businesses to stay on top of developments like this and ensure that they are planning and preparing for worst case scenarios.
So what conversations are taking place in board rooms across the country at the moment? Well, no doubt there is a lot of discussion about how best to protect their business interests amid all this uncertainty. For many businesses, it may be a case of diversifying their products and services or looking for new markets to sell into outside of Britain. Whatever decisions are made, one thing is certain - these are challenging times for British businesses but also times where opportunities can be seized if companies are adaptable and agile enough to act quickly enough.
Here are some discussions that your board of directors might think about:
1. Review your hedging strategy
If you have an existing hedging strategy in place, now is the time to review it to see if it still makes sense for your business. If you don't have a hedging strategy, now is the time to put one in place. A good hedging strategy can help reduce the impact of currency fluctuations on your business.
2. Diversify your supplier base
If all of your suppliers are based in the UK, you may want to consider diversifying your supplier base to include suppliers from other countries. This will help reduce your exposure to currency fluctuations.
3. Review your pricing strategy
A falling pound will have an impact on your costs, so you'll need to review your pricing strategy to ensure that you're still able to compete in your market. You may need to raise prices or offer discounts to stay competitive. Reviewing your pricing regularly will help you stay ahead of the game.
4. Review your supply chain
A falling pound may have an impact on your supply chain, so it's important to review your supply chain and make sure that it's still fit for purpose. You may need to make changes to your supply chain in order to mitigate the risks posed by currency fluctuations.
5. Increase communication with stakeholders
As well as reviewing and modifying internal processes, it’s important that businesses also communicate these changes with all relevant stakeholders – customers, suppliers etc.. Open and proactive lines of communication will help build trust and confidence during times of uncertainty
6. Have contingency plans in place
Having contingency plans in place will enable businesses to act quickly and decisively if/when problems do arise as a result of adverse market conditions
7. Keep abreast of developments
Although there’s only so much businesses can do proactively, it’s still important that they keep abreast of all relevant developments, both locally and internationally. This will help businesses understand how changing international circumstances might impact their operations and allow them time to make any necessary changes. Changes in tax law are particularly important following budget updates to ensure your business is getting the best value they can,
8. Understand what’s covered by insurance
In some cases, currency fluctuations may be covered by insurance policies It’s important that businesses understand what their insurance covers and what it doesn’t so that they can make any claims accordingly.
9. Use of technology
Technology can help businesses manage their exposure to currency fluctuations more effectively. There are a number of software applications available which can help businesses track their currencies, set alerts for adverse movements etc here is an easy one to use from Wise.
10. Seek professional advice
In some cases, it may be beneficial for businesses to seek professional advice from accountants or other financial experts. They will be able t o provide guidance on how best t o protect businesses from currency fluctuations as well as other potential problems.
Currency fluctuations are a fact of life for businesses operating in today's global economy. However, there are a number of actions businesses can take to mitigate the impact of a falling pound. By review their hedging strategy, diversifying their supplier base, reviewing their pricing strategy, and increasing communication with stakeholders, businesses can weather the storm and come out stronger on the other side.
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