UK manufacturers are on the world stage of global producers and the industry looks set to continue on its positive trend since last year's promising performance. Yet despite order books remaining stable, there are still major concerns for UK manufacturers surrounding Brexit, the uncertainty it brings and how it will impact upon their bottom lines.
According to the Annual Manufacturing Report 2018, 67 per cent of manufacturers said Brexit is making planning difficult and is damaging business prospects. There have also been reports of manufacturing firms planning to cut their workforce to manage the costs of Brexit. But manufacturers can mitigate losses and create some certainty during such turbulent times with better knowledge and awareness about foreign exchange (FX) and how to get the best rate.
Many exporting manufacturers can struggle to keep on top of FX management, particularly small and medium sized enterprises (SMEs), which often do not have the time or resources to dedicate to this area of their business. As a result, these manufacturers are continuously losing out on thousands of pounds, especially if they don't seek the best deal.
Paul Langley, managing director of Swansea-based FX firm Godi Financial, claims one of the main obstacles for manufacturers with currency exposure is currency management. He suggests manufacturers should shop around for the best currency transfer rate, as rates from firms like Godi are often a fraction of the cost of major UK banks.
The latest Office for National Statistics (ONS) figures show total UK exports has increased to £628.9 billion. When considering UK banks often charge a standard FX margin of 2 per cent, over £12.5 billion of this export value is being lost by manufacturers through transfer fees. If a transfer rate of 0.5 per cent had been secured, which is the maximum rate Godi typically charges, over £9 billion could have been saved by manufacturers.
As well as securing the best rate, Langley also suggests manufacturers have a currency hedging strategy in place that accounts for all known costs and exposure, turning otherwise variable costs into a fixed cost to the business.
Langley said: "Manufacturers are losing out on billions because they do not have an appropriate FX strategy in place. These businesses need to be aware of what they are losing out on in terms of their FX strategy - if they have one - and how their rates are being managed.
"It still shocks me that manufacturers instantly lose a lot of money from simply accepting a standard transfer rate instead of seeking a better deal that could save them significant amounts of money. What's even more concerning is the number of manufacturers who are being stung with a hidden transfer fee due to a lack of transparency from their FX service provider.
"We aim to educate manufacturers on how they can minimise financial loss through transparent FX management and offer a transfer rate that is marginal compared to major players in the financial sector so that manufacturers' profits don't take a hit."