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Forex

How Brexit Will Affect the Cost of Trading

For entrepreneurs, business owners, and those with a vested interest in the commercial sphere, one of the most important questions to ask before placing a vote in the Brexit referendum will be this: what would a ‘leave’ vote mean for UK imports and exports?

Those who wish for us to remain as part of the European Union are quick to claim that a deleterious fallout would be inevitable. Those with an opposing view, who would rather choose to exit, call this fearmongering.

Trading

The truth is that we cannot say with any degree of certainty what the long-term impact of either decision would be. Come 23rd June, we will have our answer with regards to the outcome of one of these choices; as to the other, we’ll never know.

Yet there is one thing that we can say with confidence. In the short-term at least, a vote to ‘leave’ would mean a sharp decline in the value of the pound. Every time a poll suggests that such an outcome is likely, the markets panic, and sterling falls. Should such a reality come to pass, a continuation of this trend is inevitable.

So what does this mean for your business?

The Impact on Imports and Exports

History and logic show us that two things happen when the value of a currency drops: exports become more competitive, and the price of imports increases. The reasons for this are obvious: when a currency is worth less, the relative value of goods bought from other countries becomes more expensive; in reverse, domestic goods become cheaper for foreign business ventures to buy, thus making them more desirable.

In the UK, around three million jobs are linked to the export industry. Although this would seem like good news for these workers, the remain campaign argue otherwise. In ordinary circumstances, the industries that employ these people would see a boost, but those who oppose leaving the EU believe that if we sacrifice access to the single market and its 500 million potential buyers, trade volumes will fall. The new existence of tariffs and barriers will deter cross-border trade, and our export sector will no longer thrive.

Which way the die will fall remains to be seen, but the negative impact on import industries, along with the potential consequences for businesses that export, are points worth bearing in mind before you make your decision.

How to Guard Against Currency Fluctuations

A drop in the value of the pound should we leave the EU is almost inevitable, but the impact of it upon your business could be lessened in one simple way: by using a currency broker rather than a bank for exchanges. Firms like Sucden Financial tend to offer rates that are around three times more competitive than their traditional alternative, which can amount to a significant sum for those exchanging large amounts of money. What’s more, they work on a fee and commission-free basis, which symbolises a further saving of up to £40 every time that you need to change your capital from one currency to another. Most importantly of all, however, is that many entities will offer a service whereby you can fix an exchange rate for up to two years, meaning that you can guard yourself and your money before the fallout truly hits.

The other way to protect the future of your business is this: use your vote wisely.