I was dismayed to read that the worst may be yet to come . My company is currently losing around £3000 sterling every week on the currency differences experienced over recent months. Couple this with the losses incurred over the previous 12 months and we are talking about a nett negative impact on profit of circa £300,000 sterling. No matter what size the business this is a serious hit and consideration has to be given to how best to mitigate this loss.
Hedge your currency sales?……… Yes, most sizeable companies do this, however this in itself is a drain on profitability and with the market volatility of late it makes you wonder whether you might be better served by betting red on the roulette table.
Pass it on?……… Fat chance. Right now it is hard enough to hold onto existing orders let alone up the price of already negotiated deals.
Ride the Storm?……… Ride it out, it will pass. Yes of course it will, but when and for how long and at what cost will that ride out be.
Getting down to basics it appears that the UK his having a pretty rough time of it at the moment for importing goods. However wherever there is a loser there has to be a winner and it is important to seek the winners out and find trade with them. For example, the Czech Republic has strengthened by some 30% against the pound over the last year and of course the Eurozone has strengthened by over 10%. Both these currencies have strengthened to a similar degree against the Dollar and particularly the Chinese RMB.
So the good news is that we have found it particularly easy to introduce Chinese manufactured products to these countries on a direct export basis from our factories in China.
What are the opportunities for UK companies……..? Exploit your strengths and don’t be held back by your weaknesses. It is virtually impossible to export mass produced products from the UK profitably so the alternative is to find yourselves Chinese manufacturers who you can trust and who will honour trade agreements to manufacture your products for you and you concentrate on creating markets for these products in countries where the exchange rates work in your favour. Manage the relationships from the UK and ship direct from China. The savings are huge the profit potential enormous and satisfaction that comes from running a slick operation immeasurable.
Why would it work?………… People trust the British. Right now it is quite Vogue to be British and we can take advantage of that fact. Language of course is a huge benefit in that the international language of business is our native tongue.
Success lies in choosing the right manufacturing/exporting partner.
Be Carefull…. Be Quick….. Be adaptive.
Good Luck.