Buffeted by this year’s surge in sterling and the slide in the dollar, British companies are upping their protection against foreign-exchange swings.
More than half of UK corporates surveyed by MillTech — a division of currency manager Millennium Global Investments Ltd. — said they took a negative hit to earnings in the second quarter of this year. Those same firms boosted their currency hedge ratios to about 53% over the period, up seven percentage points compared to the prior-year period.
The pound has rallied nearly 10% versus the US currency in the first half of 2025, the sharpest rise over that period since 2009. Such FX strength typically weighs on the profits of domestic exporters, since it tempers the appeal of products and services sold overseas and acts a drag on international sales.
Take British American Tobacco PLC, one of the United Kingdom’s largest exporters. The company last month estimated transactional foreign-exchange headwinds will hit this year’s revenues to the tune of 1% to 1.5%.
“Translational FX was driven by sterling strength against most major global currencies, with a weakening US dollar contributing around 50% of this headwind,” Soraya Benchikh, British American Tobacco’s former chief financial officer, said on a call with analysts.
It isn’t just the strength in the pound that complicates the picture for UK-based companies. Unilever PLC, headquartered in the UK but with significant operations in the Netherlands, reported a 5.1% adverse impact from currency movements, largely due to the euro’s sharp rally against the dollar.
Trade and geopolitical risks remain top of mind for global firms amid US President Donald Trump’s trade war. But, the Milltech survey shows that central bank policy is the most pressing risk for these companies. Nearly 18% of UK corporates cited monetary policy as the most important factor impacting their currency hedging strategies, up from less than 10% a year ago.
While policymakers at the Bank of England are edging closer to holding interest rates steady in the months ahead, their counterparts at the Federal Reserve increasingly are expected to lower financing costs in September, in what would mark the first cut this year.
The pound traded 0.1% weaker at $1.3494 as of 8:15 a.m. in London, heading for a second weekly drop. That trims its monthly advance to 2.2%, still the best performance since April.
MillTech from July 28 to Aug. 6 surveyed 250 chief financial officers, treasurers and other senior financial executives at UK and US corporations with a market value of between $50 million and $1 billion.
With assistance from Vassilis Karamanis.
This article was generated from an automated news agency feed without modifications to text.
