In the current climate, it’s little wonder that some businesses in the UK may have shelved their plans to target international audiences. After all, the looming spectre of Brexit is having a detrimental impact on business confidence in the UK, particularly with a number of British manufacturers having already suffered considerable losses through declining export volumes.
While this may be of huge concern for entrepreneurs, however, it does not necessarily mean that they cannot take their business international in the current climate.
However, it does mean that they’ll need to develop a viable strategy and recognise the primary risks of transferring currency overseas. We’ll review some of these below, while asking how firms can make their capital stretch as far as possible.
1. The Political Climate in Europe
We’ll delve into Brexit a little later in the piece, but there’s no doubt that this is providing a major stumbling block for UK firms that want to expand into Europe or invest in overseas property in one of the EU’s 26 overseas territories.
The primary issue here is the weak performance of the pound (GBP), which continues to trade in an increasingly narrow range against the Euro (EUR).
This trend is unlikely to change while the political uncertainty in the UK continues to intensify, particularly with Theresa May’s Brexit deal receiving a lukewarm reception and the prospect of a no-deal exit remaining firmly on the table.
This represents a reversal of the trends prevalent a few years ago, where the future of the EUR was in doubt that the single currency continued to record losses against the GBP.
Not only does this highlight the challenges facing British firms and the need for them to time their purchase of Euros when the GBP is enjoyed a resurgence, but it also offers an insight into the volatile nature of this currency pairing and its tendency to fluctuate significantly.
2. Trumponomics and Their Impact on the Global Economy
On the subject of forex and real-time currency fluctuations, it’s important to consider the role played by America and the U.S. Dollar (USD) in the global economy.
This is particularly true in the current climate, with President Donald Trump seemingly intent on starting a global trade war and undermining any semblance of stability in the forex market.
While so-called “Trumponomics” are borne out of inherently protectionist policies designed to prioritise domestic needs, they’re wreaking havoc in the rest of the world and have sent the markets into a tailspin.
This only serves to introduce an additional layer of uncertainty to the market, causing the GBP and a host of other major currencies to fluctuate at an alarming and disconcerting rate.
The precise impact on this depends on the international markets that you’re targeting with your business, but as a general rule you should take extra time to compare the markets and consider the merits of real-time exchange rate comparison.
3. Brexit and the Great Unknown
Now we come to the elephant in the room, with ongoing Brexit developments likely to have a significant impact on the exchange rate between the GBP and other currencies.
As we’ve already said, this has caused the GBP to lose ground against the EUR and the USD, while the advent of a no-deal could send prices tumbling to record lows and cause you to shelve your plans of expanding abroad (at least into the EU’s territories).
This is because investors are likely to turn away from the GBP in their droves over the course of the next two financial quarters at least, until they can be sure of its longer-term value.
The retail-focused international money market may be particularly affected by this, with the GBP bearing the brunt of the ongoing volatility. This trend is unlikely to change any time soon, and this means that you’ll need to time your next international transfer carefully if you’re to achieve genuine value for money.