Government looking to boost SME innovation with further funding

Comments from the Corporate Desk at Smart Currency Business:

“The Government's announcement last week of a second round of Innovation Vouchers is a welcome boost for UK SMEs in securing their longer term future – however it does little to help them through the austerity-plagued quagmire of the current economic setting. Universities and Science Minister David Willetts said expansion of the vouchers programme with the injection of a further £1.1million would encourage small businesses to develop new ideas. While it does show the Government is looking at ways to boost innovation, the application process and quarterly distribution of funds – rather than as and when an application for funding is approved – demonstrate a continuation of the red tape SMEs must face in the gamble to secure limited government support for their growth.

In the immediate term, SMEs would do better in 2013 by analysing their current operations to identify ways to cut costs and streamline existing processes in ways that do not adversely affect output. Whether it be finding more competitive partners and suppliers, negotiating better payment terms, insuring against unforeseen troubles or accessing specialist advice to tackle complex operating issues, auditing your firm's finances could be just the ticket to strengthening the business' position for a happy and prosperous new year.”

For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com

The Smart way to make company relocations more cost effective

Unfortunately for many businesses and their employees, the issue of currency exchange becomes an after-thought when relocating abroad – despite the potential for this aspect to be the most costly of all.

There are plenty of things to consider when undertaking an international relocation. There is selecting a removals company, organising accommodation in the new country, arranging visas for staff moving outside of the EU, ensuring adequate transit insurance is in place, booking flights, sorting what equipment will be relocated...the list goes on. Yet managing currency transfers is all-too-often forgotten.

International relocations will affect an employee individually, the company's HR division as well as the business at large, so the costs of overlooking any means of achieving substantial cost savings can have wide-felt reverberations.

HR departments must ensure that any relocation produces cost benefits and/or improved efficiencies in order for the move to be feasible. There is also a duty of care for employees, while maintaining a satisfactory level of productivity.

This requires a careful balancing act, making the move attractive for employees so as not to lose skilled workers, while meeting budgetary constraints.

When making payments associated with an international relocation, HR managers should look not just at the costs of the required services but also the exchange rates they are receiving to ensure optimal value is being achieved. Foreign-denominated costs can include immediate employee expenses, employee accommodation, visa applications, taxation registrations, local insurance coverage and so forth.

For a business as a whole relocating offshore, the cost burdens will be even more acutely felt. Indeed, changes in exchange rates can mean the difference between profit and loss on future transactions, and even negate the need to move at all.

Exposure to currency rate fluctuations does not just affect the cost of the immediate relocation.  On an ongoing basis, exchange rate movements directly affect the cost of imported materials, the competitiveness of exports and the profit margins on sales. Exchange rates also have more wide-reaching affects, such as on the price of energy and cost of living – affecting business operating costs and staff wage pressures.

Indirectly impacting on businesses are the impacts on the employee. Even if the business directly covers the costs of their relocation, there will still be personal costs incurred, such as transferring money from the sale of UK assets, accessing their salary and personal travel back to the UK.

Prohibitive costs in these areas have the potential to reduce the attractiveness of a relocation to employees, result in demands for higher relocation allowances or lead to employee stress which, in turn, affects staff productivity and morale.

Given these wide-reaching effects of adverse foreign exchange transactions, it is crucial for business operators to consider whether currency risk mitigation strategies are factored into their  overall risk assessment and management strategy.

There are a number of ways businesses can reduce currency-related costs during a relocation. For example, forward contracts enable a favourable rate to be locked in for up to 12 months in advance, and are a valuable means of delivering cost certainty and budget integrity. Orders to buy allow non time sensitive transactions to be completed once market rates reach a a pre-determined point. And a limit order allows a business to set a floor under the price at which it is willing to make a trade, so as to restrict wild fluctuations and protect against losses from adverse rate movements.

Once a risk mitigation strategy has been formulated, the next step is to determine a way of implementing it that does not add to the already numerous expenses incurred as part of the relocation.

Far from being effective management tools, high street banks are actually the least efficient avenue in which to pursue currency transfers. Notorious for poor customer service and lengthy queues – both in person and over the phone – banks also charge hefty transfer fees on most transfers for SMEs.

These fees can equate to £30 or more per transfer. For businesses making dozens of transfers each week or month, these fees can quickly add up to thousands and even tens of thousands of pounds. Banks also effectively double dip on currency transfers by providing less-than-competitive rates of exchange.

In any aspect of an international relocation, Smart Currency can offer significant cost savings and added value – at no direct cost to the user.

As a reputable international payment specialist, Smart Currency Business assists UK SMEs by offering tailored risk mitigation planning, access to all of the major currencies and the full suite of currency transfer services. Smart does not charge transfer fees on transactions over £3,000 and offers better-than-bank exchange rates which deliver savings of as much as 4 per cent of the value of the transfer.

For the individual, Smart Currency Exchange assists clients on large and regular transfers, which are both handled efficiently and very cost-effectively. This personal service is a great help during what can be a difficult and stressful time.

For more information on how Smart Currency Business can reduce the costs of an international relocation for your firm and your employees, call us today on 0207 898 0500.

Case study: Claydon Drills

When your livelihood depends entirely on the whims of Mother Nature, it is absolutely vital to address the areas of your business that you can establish complete control over. This is the issue faced by Suffolk based company, Claydon Drills, who design and manufacture agricultural seed drills for farmers.

Denise Claydon tells us: “Our industry is 100 per cent weather dependent so if there is a bad year, of course this impacts on sales of our drills. 2012 has been a year of uncertainty. Some places haven’t even harvested yet and unfortunately this takes its toll”.

Claydon Drills came to life after Denise’s husband designed and built his own seed drill. After a neighbour caught glimpse of the innovative design and enquired as to whether he could purchase one of his own, word spread and soon their drills were being sold throughout the UK and across the water in Europe. With a need to pay suppliers in Germany and Italy, the company turned to their high street bank to complete the transfers.

Denise explained: “We used to have to travel to the bank, queue, wait in the bank for half an hour while they manually checked everything and then leave not knowing when they payment would clear. Inevitably it would take about a week and as business grew and we needed to pay suppliers more efficiently this level of service was no longer acceptable. This is when we began our search for a currency expert, found Smart and since that day, we haven’t looked back”.

“Initially Smart enticed us with good exchange rates but it was the incredibly simple process, excellent customer service and invaluable advice offered by Alex Bennett on how we should budget for international currency transfers which made us continue to use them. If I were ever to encounter someone who could benefit from their service like we have, I wouldn’t hesitate to recommend them!”

The message is clear. Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. The team at Smart Currency Exchange have a unique understanding of the challenges faced when doing business internationally.

To find out more and download a free currency report go to www.SmartCurrencyBusiness.com or call Freephone 0845 638 0571 (or +44 (0)207 898 0500).

Making the push into new markets abroad

This week's view from Smart Currency

The big news item in the business world last week was the latest economic figures from the Office for National Statistics (ONS), which showed the UK clawed its way out of recession in the third quarter of 2012. However business and political leaders were quick to point out this result was helped, at least in part, by one-off events such as the Olympics, and that overall economic activity remains subdued.

Regardless of the official statistics, anecdotal evidence suggests that many British businesses are continuing to seek opportunities abroad in order to pursue growth or, in extreme cases, to survive. Indeed BPF President Philip Watkins has encouraged plastics companies in the UK to look hard at export opportunities, particularly outside of beleaguered Europe.

Many smaller companies in particular are often wary of venturing into new markets, fearful of exposure to exchange rate fluctuations. Indeed 65% of the businesses recently surveyed by Smart Currency Business agreed that such exposure acts as a deterrent to entering new foreign markets. However in doing so, these companies are missing potentially vital streams of revenue and profit growth, as well as the chance to diversify their base of both customers and suppliers.

When trading internationally, businesses must confront a range of factors, including foreign exchange. The difference between success and failure when facing these issues depends on the kind – and amount – of advice received from experienced specialists in the field. Devising tailored risk management strategies for entering new foreign markets is one of the services Smart Currency offers, which help businesses to make the most of new opportunities overseas during these subdued economic times at home.

 For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com

Case Study: Walwyn Fine Antique Clocks

The business of buying and selling antiques is not the same as your everyday retail operation. With such prized pieces of history on sale, buyers and sellers don’t tend to make hasty decisions. Although the need for international payments can be erratic, when it does arise, it is important that payments are made swiftly and that an agreeable exchange rate is achieved every time.

After running Kensington’s Rafferty and Walwyn Ltd for quite some years, Howard Walwyn decided to branch out on his own and his new company, Howard Walwyn- Fine Antique Clocks now handles exquisite timepieces from a range of makers spanning the globe. Dealing with suppliers and highly experienced craftsmen in a number of countries created a need to enlist the services of a reputable company to deal with all of their international currency transactions. On a friend from the antiques industry’s recommendation, Howard Walwyn was led to Smart Currency Business…

“After receiving the recommendation, I took the time to investigate Smart and a number of their competitors. The service that Smart provided was by far and away the best of the bunch, the rates offered put those offered by the banks to shame and no expensive fees were charged. Above all, Smart were reliable and trustworthy - just what we were looking for”.

Howard embellished on the levels of service received from his personal trader, Siobhain Barry: “I was instantly put at ease by Siobhain, so much so that I decided to use Smart Currency Business for not only my business account but my personal transfers too”.

He continued: “No matter how close together or far apart my payments are, the team are always on hand as soon as the need to make an international transfer arises. I am kept in the loop at all times so I always know where my money is and I enjoy feeling confident that I am getting the best rates possible at time of trade”.

In addition, Howard was quick to express his joy after hearing that Smart Currency Business had been appointed partner and recommended service provider to the British Antiques Dealers’ Association (BADA). It seems only right that for an organisation like BADA, who place such great emphasis on establishing and maintaining confidence between its members and the public, that they have forged a partnership with a trustworthy company who dedicate their time to getting to know and meeting the needs of their valued clients”.

Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information, get in touch with the team at Smart Currency Exchange on 0207 898 0503.

For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com

Imagro UK - Case Study

In the plastics and rubber industry even the smallest margin can have an enormous knock-on effect on all areas of the business. This makes it vitally important to have an effective currency strategy in place in order to limit loss and allow focus to remain on maximising profit.

Imagro UK formed back in 2009 following the acquisition of LG International UK’s polymer division. As they specialise in importing polymers from the Far East and from across Europe, each month they need to transfer large sums of US dollars, sterling and euro to pay their various suppliers and offices around the globe. Only a few short years after inception, Imagro UK had established themselves as a major partner for the sales of LG Chemicals and a number of leading polymer producers. With this success came the need to implement an effective currency transfer strategy and that’s where Smart Currency Business could help.

Managing Director, Matthew Sydenham revealed how Imagro UK came to enlist Smart’s services: “We weren’t getting great rates from any of the three or four banks that we were using back then and they were never able to tell us when our contracts would be finalised. This meant that it was a case of placing an order for a currency exchange and then sitting around, twiddling our thumbs and waiting with baited breath to discover what rate we had been lumped with when they finally got around to dealing with it. That just wasn’t going to work for us so after I was recommended Smart by a contact; we got in touch and have been working with them for almost a year now”.

You might wonder how exactly Smart can help with the tight margins experienced throughout the supply manufacturing industry. Matthew continued: “We need to make sure that we’re constantly focused on limiting our losses. We do this by setting a target exchange rate for each month that we would like to achieve. If we have time, Alex Bennett, Head of Sales, will lock in the rate with a Forward Contract or he will watch the rate until it reaches a satisfactory level that we are happy to trade at”.

Matthew elaborated on Alex’s personal service: “Alex calls us regularly with interesting ideas about how he can help us further and how we can improve the ways that we operate. It’s good having someone like that working to help you. The proactive relationship management that we enjoy from Smart is refreshing when you are used to encountering FX companies who are all about getting your business but who have no interest in dealing with you in the professional, efficient and accessible way that the Smart team do”.

Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information, get in touch with the team at Smart Currency Business on 0207 898 0500.

For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com

Robust currency strategy a ‘must have’ for businesses wanting to protect their international trade

The Chancellor of the Exchequer, George Osborne has set a target of one trillion – or one thousand billion – for the value of UK exports by 2020. Some might say this is an overly ambitious target, especially as recent figures showed that UK exports actually fell for June amid ongoing global uncertainty.

However, while the Chancellor’s target may well have been set with headline writers in mind, I also happen to think that putting exports at the heart of economic strategy and raising the profile of exporting generally sends out exactly the right signal to UK companies right now. In an era of globalisation, countries that have buoyant exports sectors are better placed to improve living standards as a whole – just ask Germany, the world's third largest exporter with $1.408 trillion exported in 2011.

In many industries in the UK, where local markets are becoming increasingly saturated and demand is – in many cases - contracting, having an international arm is now a necessity.

The only note of caution I would sound with regards to exporting is the issue of foreign exchange. As currencies around the world continue to fluctuate significantly, a robust currency strategy is becoming a ‘must have’ for those of you engaged in international trade. The likes of the Indian rupee, the US dollar, the euro and UK sterling are all seeing ongoing volatility as authorities around the world continue to scratch their heads about the issue of debt. Implementing a currency strategy can negate the currency fluctuation risks for companies engaged in international trade.

At Smart Currency we adopt a range of techniques such as forward contracts and spot contracts to provide stability to UK exporters and importers. We also help exporters to maximise margins by offering significantly better-than-bank currency exchange rates.

Until worrying debt issues in the likes of Greece, Spain and Italy are resolved, we can expect to see more currency swings in the coming months. Whether you import or export, now is the time to hedge your bets by adopting a sensible currency strategy to protect yourself from further market volatility.

For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com

Smart take pole position for Classic Grand Touring

It may sound like a dream come true – hosting classic car rallies through beautiful landscapes in Europe surrounded by just the thrum of powerful engines and the chatter of fellow car enthusiasts – however without the capacity to make international currency transfers with ease, it could become a logistical nightmare.

This was the conundrum faced by Classic Grand Touring before they discovered Smart Currency Exchange. With over 25 years’ experience in the field between them, father and son team Nick and Thomas Brimblecombe formed Classic Grand Touring to offer bespoke and pre-arranged driving tours to the world’s finest motoring events. Thomas explained what they do: “We specialise in car tours and rallies to historic events– all of which are based in Europe, mostly in France but we go out to Spain, Italy and Portugal as well. The most recent tour we went on was Le Mans Classic. I put together the itinerary to the event, all the routes, the hotels, tickets and hospitality -we take care of everything”.

Prior to being recommended the services of Smart, Classic Grand Touring had enlisted the help of a private bank to make their international currency transfers: “When I look back and compare the service that we received there with how easy things are after signing up with Smart Currency Exchange, things don’t even come close. The rates we were offered before were terrible and an extortionate fee was added on to every single transaction”.

After becoming increasingly exasperated with their bank Thomas decided to act upon a recommendation he had received from a business contact. Thomas contacted Smart and after speaking to Currency Consultant, Bryan O’Connell about the services they could provide, Classic Grand Touring were quick to sign up.

“We’ve been using Smart’s services since around April this year. We signed up just in time, with such a busy schedule and sometimes up to 90 people on our tours it is absolutely essential that we can transfer sterling into euros or Swiss francs and make payments to our suppliers quickly and easily. I’m pleased to say that they service that we have received from day one has been nothing short of exemplary”.

Thomas continued; “It’s the ease of use that really appeals to us. After the initial sign-up we were assigned Siobhain Barry as our personal trader. She is fully aware of how Classic Grand Touring operates and what is important to our business. After a quick call with her, she will let me know the rates and then the transfer is made. It’s the ease of use that is the main appeal to us – the fact that I can be anywhere in the world and the process is still seamless. This is what has led us to recommend Smart to friends, clients and contacts”.

Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information, get in touch with the team at SmartCurrency Exchange on 0207 898 0503.

What does sterling’s recent rise spell out for exporters?

As I write, sterling stands at 1.27 against the euro and 1.55 against the USD. Our forecasts for GBP/EUR are 1.27 (3-months) and, again, 1.27 (12 months) while for GBP/USD they are 1.55 (3 months) and 1.54 (12 months). Sterling’s rise against the euro has come on the back unrest and uncertainty in the eurozone. 12 months ago the rate for GBP/EUR was 1.12, and that increase in its value has directly hit margins for exports.

The euro has weakened against sterling and other currencies on the back of grave uncertainty around the economies of some of its key member states. Spain, Ireland, Italy, France and, of course, Greece face significant debt issues.

And yet, while the eurozone has its problems, the UK does too. The UK economy slipped back into recession during 2012. The Bank of England’s monetary policy of quantitative easing and rock bottom interest rates are designed to help kick-start the economy but they also serve the duel purpose of weakening sterling, which helps export markets.

Looking at the bigger picture, one could sum up the exchange rate situation by saying that, while the euro hardly represents a safe haven for investors, neither does sterling. The aforementioned exchange rate predictions are based on current knowledge and that all other things will remain equal.

However - and this is the critical point – if recent months have taught us anything it is to expect the unexpected. There are a number of eminently possible events – one or more countries leaving the eurozone or the markets perhaps setting their sights on the UK’s own debt issues – which would impact dramatically on exchange rates. As many exporters will be aware, sudden shifts in exchange rates can quickly erode the profits on a deal.

Moving forward, I firmly believe an export strategy represents the best bet for businesses in an uncertain world. However, I would urge businesses trading globally to consider using hedging techniques such as forward buying as part of an overall currency strategy. Exchange rate movements will always impact on international trade generally but by planning ahead and giving some thought to currency issues, exporters can ensure that their hard work in securing and executing a foreign contract is not undone by unexpected exchange rate movements.

For further information and your free report visit www.SmartCurrencyBusiness.com or call 0207 898 0500.

Businesses can secure a saving when purchasing capital equipment abroad

The cost of purchasing and maintaining capital equipment is a significant challenge for many businesses. In an effort to source the best products on the market at the most competitive prices, many companies have begun to look abroad. While importing capital equipment is not without its challenges, it can be beneficial and cost savings can be made.

There are, however, many factors to consider. The first is the value of sterling against the euro which immediately has an impact on the relative cost of any machinery being imported. Sterling has risen by more than 15 per cent against the euro in the past 12 months. Think about this: simply due to exchange rate shifts, you are immediately making a hefty saving on any import compared to this time last year.

There are also legal and technical issues to think about when importing machinery. Does the equipment meet EU and UK health and safety standards? If equipment is brought into the UK from a destination where safety standards are not as stringent as in the UK, work will need to be carried out to ensure that it can legally be operated here.

VAT issues are another key consideration. To take the example of a tractor – an increasingly popular import - under current guidelines, no VAT duty is due in the EU provided you can prove: the vehicle is more than six months old; it has more than 6,000km on the clock; VAT was paid on the original purchase. If these can’t be proved, the vehicle will be classed as ‘new’ and VAT will be due again on the import. Take professional advice if in doubt.

There are various avenues for sourcing machinery abroad. Online resources are widely available, a good example being www.machineryzone.eu. A mammoth site, it lists tens of thousands of items of equipment and commercial vehicles.

In terms of prices, it’s difficult to make general observations about such a vast market. For example, my own research and anecdotal evidence suggests used tractors can be sourced at hugely attractive prices in France, Germany and Holland. But you need to thoroughly research the market yourself - and remember; if a deal looks too good to be true, it probably is.

Shipping is a critical issue. While the more industrious among you might be tempted to head overseas to pick up your own product, others need to take care to source a competent shipping agent in order to ensure your machinery arrives in accordance with international importation laws. Can you be sure your agent will handle your product with care? Shop around and ask for testimonials if necessary.

One final point worth mentioning is alluded to earlier: exchange rates. In theory, now is a good time to be importing from the Continent given sterling’s rate against the euro. But be mindful that exchange rates are volatile right now and a sharp shift in rates between agreeing a deal and making payment could alter the price you pay significantly. Take professional advice if you have any concerns.

For further information go to www.SmartCurrencyBusiness.com or call 0207 898 0500.

Sporting chance for Sterling as Eurozone continues to look uncertain

Spain’s football team has been crowned one of the most successful national sides of all time, following consecutive Euro Championship victories. Meanwhile, off the pitch, its banks – along with those of neighbouring southern European states – are struggling through a perilous and relentless losing streak, putting pressure on the euro.

The recent EU Summit should bring some short-term relief to Europe's struggling banks. European leaders have finally agreed on the creation of a joint bank supervision scheme – to be effective by the end of the year - and the ability of bailout funds to bypass national governments and go direct to struggling European banks. These developments are no silver bullet to the underlying Eurozone debt crisis, but rather a first step in creating an environment that could support efforts of the worst hit countries to begin the fragile process of reigniting economic growth. 

The next EU Summit is in October, when the next step in implementation of measures to aid euro nations will be confirmed - as we all know, the Eurozone needs surgery, not a constant stream of Band-Aids. Until then, it is expected that Sterling will retain its three-year high against the euro. We’re hosting the Olympics this month too – the feel good factor from this, combined with the short-term boost to local UK businesses could be a shot in the arm for Sterling. Something worth bearing in mind when timing any upcoming international payments.

Businesses with profit margins affected by market fluctuations can eliminate the risk of buying currency by calling Smart Currency Business on 020 7898 0500 for more information or visit www.smartcurrencybusiness.com to find out how much you can save.

Ten top tips for businesses making international payments

Carl Hasty, head trader with Smart Currency Exchange offers ten tips for businesses looking to make international payments.

Do your homework

There are now a wide range of options for making payments abroad. First and foremost, then, do your homework. Consider your requirements: do you need to make a few one-off payments? Or do you make regular payments to particular suppliers? For regular payments, a specialist foreign exchange (FX) supplier is the most cost effective option.

Look beyond banks

Banks were once the mainstream option for making international payments. However, technological and regulatory change has opened up the FX market. Many of the newer solutions compare favourably to banks – offering lower fees, more competitive exchange rates and better service.

Beware hidden charges

The two costs to consider when making payments abroad are fees and exchange rates. With some companies you need to be wary of hidden charges which can mask the true cost of a transaction. In terms of exchange rates, some providers might advertise ‘commission-free’ payments but then hike the exchange rate they offer. Look carefully at the small print whoever you use.

Ask about final costs

Look for transparency and openness from your FX provider. A reputable FX provider should happily tell you the final cost of your transaction after charges and exchange rates are taken into account, enabling you to make an informed decision.

In whose interests?

Our own FX traders are not paid commission – meaning they always have the client’s best interests at heart. This, for us, provides a safety net for the client, yet it is surprising given the scrutiny the financial services sector has been under of late that more firms don’t take our approach. Whichever FX supplier you choose, it is worth asking how their traders are paid.

Comparing rates

The UK has the most crowded FX brokering market in the EU. But how do you compare the exchange rates of various brokers? A number of useful comparison websites have set up to help with this - www.fxcompared.com is clear and easy to use.

Don’t forget security

Ensure your FX company is FSA authorised. Also satisfy yourself you are dealing with a reputable player. Ask for testimonials and find out how long the company has been in operation. Currency exchange businesses don’t have to be authorised by the FSA unless they are trading more than three million euros a month – meaning if there is a problem, you won’t be guaranteed full protection.

Service is key

We believe your FX and international payments provider should be doing more for you than simply providing competitive rates. They should work with your business to understand its goals and keep it up to date with events in FX markets – by doing so, your business could save thousands of pounds each year.

Timing is everything

We always inform clients when the exchange rate for the currency they are transacting in appears good – and offer them the choice to ‘buy in’ currency for future payments using a forward contract. Businesses save a fortune by getting the timing right; again, this is something a quality currency partner should help with.

Be careful!

FX markets are volatile right now, reflecting uncertainty in the global economy. Ask your FX supplier about hedging techniques which can help protect against wild fluctuations in exchange rates. They should be ready to explain about the principles of hedging – and how they apply to your business requirements - in a clear and easy to understand manner.

For more information about FX, please see www.smartcurrencybusiness.com and download our free Outlook. Alternatively call us to discuss your requirements on +44 (0)207 898 0500.

Spain’s euro woes highlight wider opportunities for UK importers

From a financial and economic perspective, these are interesting, difficult times for Spain. I’ve mentioned in previous articles about the danger that the markets might begin to pick off weaker Euro zone countries one by one, and such a scenario appears to playing out.

Spain’s banks are now in the process of being bailed out by the European Financial Stabilisation Mechanism (EFSM) which comes as no surprise to those who saw how recklessly Spain’s banking sector behaved when buying into the Spanish property boom. Where this will end is anybody’s guess given that, firstly, the property market represents an alarming percentage of Spain’s GDP and, secondly, the current bailouts assume no further deterioration in the value of the existing loans on Spanish bank books. If asset – property - prices keep falling, one would assume more support will be needed to prevent the banks becoming insolvent.

Concerns about Spain are reflected in Spanish 10-Year government bond yields which have been knocking on the door of seven per cent of late. So how is all of this impacting on the value of the euro which, in turn, affects costs for those importing products from Spain and the rest of the Euro zone?

In relative terms, Spanish products have actually been getting less expensive for UK importers. For the past month, UK sterling v the euro has hovered around the 1.24 to 1.25 mark, the euro having weakened considerably during 2012. This is a good time to be importing from the Euro zone, for sure.

Even so, it’s still vital to have a currency strategy in place as the recent bailout of Spain won’t be the end of matters where the Euro zone crisis is concerned. Austria's finance minister Maria Fekter recently said that Italy might also require financial help soon due to its high borrowing costs. She also added that Euro zone rescue funds, which have been stretched by supporting Greece, Portugal, Ireland and Spain, could be insufficient to cope with Italy as well.

In theory, this, the dreaded ‘contagion’ scenario, should send the euro tanking even further against supposed safer havens such as UK sterling and the US dollar. But the reason for a currency strategy is this: where currencies are concerned, there are no sure-fire safe havens right now. Consider this: at the same time as Spanish banks are being bailed out, the Congressional Budget Office (CBO) in the US has recently issued its annual long-term budget outlook report. The 2012 numbers see the CBO estimate that US federal debt will rise to 70 per cent of GDP by the end of the year. This is the highest percentage since World War II. So, while the euro might not look very attractive right now, you wouldn’t want to be putting too much faith in the US dollar either.

The message in all of this is simple: hedge your bets as further currency volatility is inevitable. Snap up some euros around that aforementioned 1.25 mark and purchase Spanish products at what will be, for UK importers, the most competitive prices for more than three years. But build in some scope for further euro purchases later in the year. All other things being equal, we’d expect the euro to deteriorate even further.

At Smart Currency Exchange, we update our views on the euro/sterling exchange rate on a daily basis. We also produce on a monthly basis our “Outlook” report which pulls together our thoughts and those of the mainstream banks on where to next for exchange rates. Download your copy now at www.SmartCurrencyBusiness.com or call us on 0845 638 0571 (or +44 (0)207 898 0541) to discuss your situation.

Think Smart, Act Globally

Having a global outlook is a vital attribute for business leaders argues Carl Hasty, Head of Trading with Smart Currency Exchange.

The issue of management and leadership – a subject which, I think we would all agree, is critical to the fortunes of the national economy - often comes down to the question of what makes a good leader. For my own part, I firmly believe one of the most important attributes for business leaders of the future will be the ability to think globally.

Now, you don’t need to be Einstein to figure out why I should draw such a conclusion. Figures from earlier in spring showed that the UK had once again slipped back into recession. Indeed, since mid-2008 the UK has had seven quarters of GDP growth – compared with nine quarters of GDP contraction.

On the face of it, then, these are worrying times, particularly given ongoing unrest in the Eurozone. And yet, there is a world of opportunity out there. At Smart Currency we work with hundreds of exporters who see the world – not the UK – as their market. They think in global terms and their leaders and management teams have a global vision.

So is now a good time to export? In my opinion, there’s never a bad time to be exporting. Question - what do the following countries have in common: China, Qatar, India, Iraq, Estonia, Turkey, Saudi Arabia, Indonesia, Hong Kong and Singapore? The answer is that these are just a few of the 70-plus countries whose GDP growth rate exceeded 5 per cent in 2011.

Clearly, the global market offers opportunities for firms around the world. My overriding point here is that it is easy to get caught up with the doom and gloom engulfing the UK economy and, in the process, lose sight of the fact that many parts of the world are developing fast in all manner of business sectors.

Currency strategy

While I am all for thinking globally, I would add that any business embarking on an international strategy right now needs to have a currency strategy in place. The uncertainty of the global economy has led to volatile exchange rates in recent times. Sterling has moved markedly against the euro and US dollar of late. For exporters without a currency strategy, movements in sterling’s relative value will prove costly.

At Smart, we can help your business develop a robust currency strategy in order to negate the currency fluctuation risks associated with international trade. Smart adopts a range of techniques such as forward and spot contracts to provide stability to those engaged in international trade. We also help exporters to maximise margins by offering significantly better-than-bank currency exchange rates.

We expect more currency swings in the next few months as the Groundhog Day scenario that is the Eurozone crisis rumbles on. By partnering with Smart you won’t need to worry about currency movements and their impact on your foreign contracts, and can instead focus on developing your business beyond the shores of the UK.

To ensure you’re getting the best information on FX, get a risk strategy in place. Smart Currency Exchange can help you do this in one phone call. Call us now on 020 7898 0500 or visit our site at www.SmartCurrencyBusiness.com

Casa Mining strike gold with Smart

Casa Mining are a leading mineral exploration company controlling large-scale projects in the Democratic Republic of Congo and Mozambique. Their primary activity involves scouting out areas to conduct exploration programmes in search of gold and other valuable minerals.

With suppliers and employees spread across Europe and Africa, Casa Mining are constantly dealing with transactions in a number of currencies including euros, sterling, Canadian dollars and South African rand.

Having grown concerned over the poor exchange rates offered by their bank, Financial Director Eoin O'Driscoll was urged to check out Smart Currency Exchange. The difference he discovered was startling. “Smart conducted an analysis of the rates that we were getting through our bank and compared it against what we would be getting if we were using them. I had never imagined we could make such a big saving. I now regularly perform comparisons and Smart's rates are consistently the best”.

As well as the competitive rates offered by Smart, it was the ease with which each transaction was made that appealed to Eoin: “Being able to deal with our transactions over email and on the phone has freed up valuable time to concentrate on other areas of the business. The main draw of Smart is the rates, but the fact that it makes our life so much easier is a fantastic added bonus”.

Eoin went on to explain how the personal service offered by Smart Trader, Siobhain Barry improved the service: “Siobhain's service has always been exemplary. Having one broker assigned to you removes any of the apprehension that you feel when transferring large sums of money. Having a face to put to the company, rather than just a website or a call centre, helps a great deal and gives you complete confidence when doing business”.

When asked to sum up Casa Mining's dealings with Smart, Eoin was happy to elaborate: “The service received is fast, efficient and pain free but by far the most important factor for us is the significantly better rates that we are offered. These don't just make a small difference to our business, they save us real money. On a typical year they save us between £20,000 – £25,000”.

It is clear that managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information and to see how Smart Currency Exchange can save you money, get in touch with the team on 0207 898 0503.

Focus on South Africa

I thought it would be worth looking at the South African Rand (ZAR), in terms of its performance as a currency in recent times and prospects for the future.

Economically, South Africa is a mixed bag. With an abundance of natural resources, the country is a major commodities exporter; its economy has opened up dramatically in recent times. And yet it still faces huge social and structural issues. Moreover, it has not been immune to the global economic downturn. China is a major resources importer and its slowdown has hit South African exports. The IMF recently said that if downside risks to global economic growth materialise, there will be greater challenges facing commodity exporters such as South Africa.

That said, economic data released since February has been positive. Economic growth forecasts for South Africa in 2012 vary. South African Reserve Bank recently upped its own GDP growth forecasts for 2012 to 3 per cent.

In the past 12 months the ZAR/GBP rate peaked at 13.31 while hitting a low of 10.67. Our forecasts for the rate are as follows: 3 months 12.37; 6 months 12.24; and 12 months 12.68.

If you want to ensure your bottom line is protected, call us now and we’ll help you put together a risk strategy.  Alternatively, you  find out more about the rate forecasts in our monthly Outlook. 

Business blooms for Beautiful Bottoms

Beautiful Bottoms was established by Poppy Sexton-Wainwright and Lauren Skerritt back in 2009 after they met as business students at Newcastle University. As soon as they concluded their studies, Poppy and Lauren were able to focus their attentions onto their company, which offers beautiful silk lingerie at affordable prices. Two and a half years later, they are still going strong.

Beautiful Bottoms products are designed in London and produced by suppliers in China who then invoice for their services in dollars. With numerous lucrative transactions under way, it became a company priority to find the best FX rates around.

Naturally, their first step was to utilise the service provided by their bank, but after their initial transactions Poppy and Lauren became unhappy with the service they were receiving and voiced their concerns to a friend. He recommended they contact Smart Currency Exchange. Poppy explained: “Our bank just didn't make us feel like our business was important to them every transaction was marred with hassle - and that's even before we mention their extortionate rates”.

Having just finished designing their latest collection their energies are now focused on connecting with their customers via social media and jetting off around the world to visit  trade fairs in Paris and New York. Being so busy, it is the simplicity and efficiency of Smart's service which really appeals to Beautiful Bottoms. Poppy elaborated:
“Everything is just so much easier with Smart. With just an email I can book in transfers to clients and suppliers – it is so simple”.

Poppy went on to compliment the personal service offered by Smart Trader, Alex Bennett and the team: ”Alex and all of the other traders that I have dealt with at Smart are always happy to advise on current FX rates and do all that they can to make it a simple and pleasant experience, with very little hassle”.

When asked whether they would ever be tempted to use another FX supplier, Poppy answered: “I have friends who work in FX trading, so I am clued up on the rates of the day. Smart give us a highly competitive rate and I very much doubt that anyone could beat that”.

The message is clear. Managing your foreign currency exposure effectively is a vital requirement for any business that deals internationally. For more information, get in touch with the team at Smart Currency Exchange on 0207 898 0503 alternatively visit our website at www.smartcurrencybusiness.com.

Stabilise your international trade as the Eurozone unravels

Following a period of relative calm at the beginning of the year, there are ominous signs that the situation in the Eurozone may be starting to unravel. First, France elected a new left wing president - Francois Hollande – who immediately told supporters that his victory gave hope of an “end to austerity”. Then the leader of Greece's left-wing Syriza bloc said he would try to form a coalition-based government which would renege on the terms of the recent EU/IMF bailout deal. Alexis Tsipras, whose bloc came second in the Greek election, said Greek voters had “clearly nullified the loan agreement.”

This is significant news for the euro and, indeed, anybody involved in import and export to the Eurozone. The reason is that it once again raises fears that we may soon witness a partial or complete break-up of the Eurozone. How likely is that? Well, it’s quite telling that bookmakers Paddy Power – who are no fools – go as short as 6-4 that Greece will be using Drachmas by 1 December 2012.

Given this precarious position, it was no surprise that sterling hit a 3.5-year high against the euro of 1.2440 in the wake of the general election results in Greece and France.

But the broader message is one I’ve spelt out before: volatility in currency markets will be the norm for the foreseeable future. Some kind of currency strategy is an absolute must-have for businesses dealing in international trade.

There’s no doubt the 1.2440 figure above looks hugely tempting. In the last issue I wrote that 3-month GBP expectations against the euro were at 1.23, moving to 1.25 on a 12-month scale. At the time of writing, I would revise those figures upwards to 1.27 (3-months) and 1.32 (12-months).

However, I would strongly advise use of a hedging strategy because the Eurozone crisis is a fluid situation. Buyers from the Eurozone could use a hedge to ‘lock-in’ that 1.24 rate – which is excellent by the standards of recent years – while leaving some scope to purchase further euros later in the year.

The reason for this is that while the situation in the Eurozone doesn’t look healthy at the moment and points to a further deterioration of the euro, things can change quickly – and recent history suggests they probably will. Remember, the UK economy itself is in recession. Moreover, the UK Coalition of the Conservatives and the Liberal Democrats is on shaky ground right now, especially after the hammering both parties took at the recent local elections. Tellingly, commentators on both left and right of the political spectrum are increasingly questioning the Coalition’s austerity measures. Yet any change in tack would likely see the markets hammer sterling.

These are, need I say it, uncertain times; a robust currency strategy for any business engaged in international trade is more important than ever. Find out how your business can avoid market volatility by emailing us, or calling us on 020 7898 0500 – you can also visit our website at www.smartcurrencybusiness.com