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Digesting the FX risks in the Food and Drinks sector

Digesting the FX risks in the Food and Drinks sector

The food and drink industry is a huge part of the UK economy, both in terms of its production through agriculture, and its eventual consumption at supermarkets or in hospitality venues around the country. Of course, the latter has been hugely affected by the coronavirus pandemic but is hoping for a bumper second half of 2021 should the vaccine rollout continue to go well. 

Many of our hospitality businesses and supermarkets import large amounts of their produce, whether that be basics like avocados from Mexico and frozen potato products from Europe or more high-end goods like French wine or Japanese wagyu beef. That’s not to mention our net export products such as lamb, salmon, and whiskey, providing billions of pounds to the UK economy every year. 

These kinds of transactions happen at every stage of the supply chain from production to processing to distribution. As a result, the UK food and drink industry requires large amounts of currency and foreign exchange services. This can lead to costs such as bank fees for payments in foreign currencies adding up quickly, and that’s not to mention how unfavourable swings in the exchange rate can affect a business’ month to month spending drastically if they are importing/exporting large amounts of goods.

Furthermore, these goods are often ordered in advance to take into account for future demand and so global suppliers know how much food needs to be grown or produced. The long lead times provide ample opportunity for exchange rates to fluctuate, especially with a tense and volatile geopolitical picture. If a business is invoiced monthly by a supplier with a 6–12-month contract, they may end up paying far more if the exchange rate changes over that time. That’s not to mention any added complications from the teething problems of Brexit and the resulting new custom checks. 

Currency UK offers a variety of solutions to these issues. Our easy-to-use FX online platform allows you to make multiple currency payments from anywhere while keeping comprehensive and up-to-date records of your transactions, making for easy management and reporting. On top of this solution, we also offer hedging mechanisms such as forward contracts. These allow you to guarantee a rate for a certain date in the future, giving you much-needed financial certainty. This is a great solution for purchasing goods with long lead times like those found in the food and drink sector. 

Our team can help you construct the right FX solution for your needs, whether they be those of a huge multinational distributor, or a boutique restaurant sourcing the best ingredients from all over the world. 

Find out more by speaking to one of our Account Managers by calling +44 (0) 20 7738 0777 or learn more here.

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