A foreign exchange (FX) expert has addressed SMEs at an export event held yesterday (Monday 17 July), highlighting the crucial need for a robust FX strategy, especially in light of negotiations between the UK and European Union (EU), which could leave businesses at risk to increased market turbulence.
Luke Walden, FX specialist at Godi Financial – formerly OSTCFX – was speaking at the CommonwealthFirst Export Day event in Westminster, London, where he addressed SMEs on managing FX as an early stage exporter. In addition to Walden, a presentation on exporting through ecommerce was also provided by Nick Landon and Richard Snowdon of Royal Mail.
Walden spoke of the recent turbulence as a result of the current political and financial landscape and how vital it is for SMEs to be aware of the risks that FX can have on business. Percentage point swings on a daily basis will remain the case while the Brexit negotiations continue.Being able to manage the uncertainty in the context of global trade is therefore of great importance.
“Speculation about what kind of deal the UK can negotiate around Brexit, coupled with volatility in the Eurozone and the wider global regions, mean that sharp movements in the currency markets are going to be the new norm.
“Whatever happens in Brussels, UK businesses will continue to export and import and work in partnership with overseas companies, but the nature of the trade deals that will shape those relationships going forward remains very uncertain. Upcoming political and financial events such as the German elections in September, should also be on the radar of companies with FX exposure,” Walden said.
With uncertainty likely to prevail in coming months and even years, protecting a business’ position was noted as a priority, emphasising major organisations that have been hit by market turbulence. EasyJet’s announcement earlier this year that currency movements cost it £105 million, is one such example of the damage market volatility can do to even well-established businesses.
“Despite the underlying business of major players being good, being the wrong side of a falling pound has been disastrous for many organisations. Yet this can be avoided with a robust FX approach. Too many businesses are simply sitting on their hands and waiting to see what happens. Leaving it in the hands of the markets really is negligent.” Walden added.
Formed by the Commonwealth Enterprise and Investment Council (CWEIC), CommonwealthFirst encourages SMEs to trade and invest across the Commonwealth. Godi is a mentor of the CommonwealthFirst initiative, providing its expertise on FX management as a strategic partner.
“Business leaders need to take control now to help create more certainty for their organisations during these turbulent times. This is possible through making foreign exchange a fixed cost to your business, hedging as far forward as you can and limiting your potential liabilities to numbers you are comfortable with,” he concluded.
Swansea-based Godi looks to educate its clients and form long-term, transparent relationships with companies where any margins or fees it earns are fully disclosed. It also offers a free audit to companies where it will assess historic FX transactions and demonstrate any savings that could have been made. This approach aligns to Godi’s values of doing things differently through education, transparency and expertise, to set a new standard of service for global financial engagements.
Sterling steadies ahead of UK budget
By Ritvik Carvalho
LONDON (Reuters) – Sterling steadied against the dollar on Wednesday and gained against the euro ahead of the announcement of Britain’s budget for the coming fiscal year, which is expected to prop up the economy as it prepares for a reopening from lockdowns.
The pound was flat at $1.3967 by 0841 GMT, after falling to its lowest in 2-1/2 weeks on Tuesday. It was 0.1% higher to the euro at 86.45 pence.
In a budget speech at 1230 GMT, finance minister Rishi Sunak will promise to do “whatever it takes”, including a five-month extension of a huge jobs rescue plan, to steer the economy through what he hopes will be the final months of COVID restrictions.
Sunak has already racked up Britain’s highest borrowing since World War Two and he will turn to the bond markets again in his budget speech, saying the task of fixing the public finances will only begin once a recovery is in sight.
“We’re not expecting too many surprises when the Chancellor takes to his feet to deliver one of the most widely leaked budgets in history,” said Robert Alster, CIO at wealth manager Close Brothers Asset Management.
“The key focus will clearly be continued support for the economy, as we navigate our way out of lockdown. Businesses will be listening closely for the approach to business rates and VAT cuts in the coming months.”
Sterling is the best performing G10 currency this year, up about 2% versus the dollar as investors bet the speed of Britain’s vaccination programme will enable a faster reopening of its economy, which suffered its worst annual contraction in 300 years.
Relief over a last-minute Brexit trade deal signed with the European Union last year and a Bank of England that has pushed back market expectations of negative interest rates has also been beneficial for the currency, which only last week hit its highest in 2-1/2 years.
Analysts remain bullish, although in the long-term, investors may focus on Britain’s debt.
“Overall, the additional fiscal support announced should underscore the constructive outlook for GBP for 2Q, with further fiscal help facilitating the economic rebound and making GBP the outperformer in the G10 FX space,” strategists at ING said in a note to clients.
“We expect sterling/dollar to breach the $1.50 level in 2H21 and dips below $1.40 should be faded.”
(Reporting by Ritvik Carvalho; Editing by Giles Elgood)
Belgian soccer club Bruges plans to list shares on stock market
By Abhinav Ramnarayan and Sudip Kar-Gupta
PARIS (Reuters) – Belgian soccer club Bruges (Club Brugge NV) is planning to list its shares on the Brussels stock market, the club said on Wednesday, in what would be a rare initial public offering (IPO) from a team in Europe in recent years.
The club has filed its “intention to float” — which signals the launch of the IPO process — and intends to list an undisclosed percentage of the company on the Euronext Brussels exchange, according to a statement to investors seen by Reuters.
Grizzly Sports NV, a vehicle that will be owned by major shareholders Bart Verhaeghe, Vincent Mannaert, Jan Boone and Peter Vanhecke, is the selling shareholder in the transaction.
They have a combined shareholding of 94.34% prior to the offering, the announcement said. No new shares will be issued as part of the deal, meaning the club itself will not be raising any fresh funds through the listing.
Bruges, currently first in Belgium’s top league, was founded in 1891 and has won 16 Belgian first division league titles.
A handful of European football clubs have stock market listings. Juventus in Italy, Borussia Dortmund in Germany and Dutch team Ajax are high profile examples, while England’s Manchester United listed in New York in 2012.
Soccer financing has attracted plenty of investor interest recently, with private equity firms increasingly keen to invest in sports leagues and clubs who are battling with revenue losses due to COVID-19 restrictions.
Berenberg, Credit Suisse and JP Morgan are global coordinators on the Bruges deal and joint bookrunners along with Belfius Bank.
(Reporting by Abhinav Ramnarayan and Sudip Kar-Gupta; Additional reporting by Phil Blenkinsop in Brussels; Editing by Andrew Heavens and Keith Weir)
Britain to ease listing rules to buttress London after Brexit
By Huw Jones
LONDON (Reuters) – Britain will “modernise” its listing rules to attract more high-growth and “blank cheque” SPAC company flotations to London, Finance Minister Rishi Sunak said on Tuesday.
The London Stock Exchange is facing tougher competition from NYSE and Nasdaq in New York, and from Euronext in Amsterdam since Britain fully left the European Union on Dec. 31.
In a bid to keep London globally competitive after Brexit, Sunak commissioned a review of listings rules last November. It was led by former European Commissioner Jonathan Hill and will publish its recommendations on Wednesday.
“The review has more than delivered and I’m keen we move quickly to consult on its recommendations, cementing the UK’s reputation at the front of global financial services,” Sunak said in a statement.
The government faces pressure to act – it announced a fast-track work visa scheme last week for fintechs – after swathes of euro stock and swaps trading left London for Amsterdam and New York after full Brexit in December.
But asset managers and company directors warn about eroding corporate governance standards by easing listing rules.
“The recommendations in this report are not about opening a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage,” Hill said.
“They are about closing a gap which has already opened up. All the recommendations are consistent with existing practices in other well-regulated financial centres in the USA, Asia and Europe,” Hill added.
Two changes seek to move London in line with New York and other financial centres by allowing founders to list their company while still retaining significant control.
As widely trailed, Hill recommends allowing dual class share structures to give directors and founders enhanced voting rights on certain decisions, a move retail investor groups say is contrary to the “one share, one vote” principle. The minimum “free float” or amount of a company’s shares or in public hands would be cut from 25% to 15%.
Hill also recommends liberalising listing rules for special purpose acquisition companies or SPACs, whose flotations in New York have surged over the past year, with Amsterdam also attracting some recently.
The prospectus, used by companies to set out their initial or secondary offer of shares, should also be fundamentally reviewed, Hill has recommended.
There should also be an annual “State of the City” report form the finance minister to parliament on the financial sector’s competitive position.
“Continuing to evolve the UK listings regime is key to providing flexibility for companies who want to list in London while maintaining high standards of corporate governance,” said David Schwimmer, chief executive of the LSE Group.
(Reporting by Huw Jones; editing by David Evans)
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