UK Firms Plan to Hedge More Currency Risk as Sterling Swings

The report surveyed over 250 chief financial officers and treasurers at UK companies in October about their hedging plans and costs. It showed 48 per cent of those polled said they had lost money as a result of the big swings in sterling’s value.

WHY IT’S IMPORTANT 

Currency volatility has accelerated this year, as geopolitical uncertainty has picked up and global trade relations have become more unpredictable since US President Donald Trump has pushed to enact his “America First” agenda.

Hedging rates by UK corporates have risen for their third consecutive year to 78 per cent, up from 76 per cent in 2024 and 70 per cent in 2023. Among firms not currently hedging, 68 per cent are now considering doing so in response to market conditions, MillTech’s survey showed.

KEY QUOTE 

“Most CFOs treat FX like a slow-dripping tap. It’s something they can put off fixing while it’s only a nuisance. But this year, that drip turned into a full-on leak, and many UK firms have been scrambling with towels and buckets,” Eric Huttman, chief executive of MillTech, said.

CONTEXT

Sterling hit four-year highs above $1.37 in July against a broadly weak dollar, then fell back as UK fiscal worries weighed on sentiment. It is set for its most volatile year since 2022, LSEG data shows.

BY THE NUMBERS

The mean hedge ratio, or the percentage of companies’ foreign exchange exposure that they protect, is at 53 per cent, up from 45 per cent in 2024. Hedges in 2025 cover an average period of 5.52 months, versus 5.55 months in 2024, but well above the 4.04 months in 2023.