Currency volatility, made worse by geopolitical turmoil, is hitting profits within food and drink businesses hard, new research by currency risk management specialist Lumon Corporate has warned.
Nearly half (45%) of UK food and drink businesses operating on margins below 10% had seen profitability slashed by a third over the past year due to FX swings, according to Lumon’s new FX Factor Report, published this week.
Its findings, based on interviews with 100 senior decision-makers at major UK exporters, highlighted the mounting financial strain on a sector already grappling with tight returns.
But despite currency volatility posing a “threat to business survival” by creating cashflow gaps, it found an “ongoing disconnect” in how the food and drink sector managed this risk, particularly for exporters.
While most companies acknowledged the severe impact of currency swings on cashflow and margins, only 14% of businesses planned to review their FX strategy over the next 12 months, Lumon said.
The report also highlighted “a dramatic shift” in global trading as UK food and drink companies attempted to navigate complex geopolitical landscapes.
F&D companies were now three times more likely to see major export opportunities in China (29%) than in the US (11%).
This “sharp drop in enthusiasm for the US market” followed the Trump administration’s package of global tariffs, alongside high compliance costs, and unpredictable market access linked to geopolitical uncertainty.
The long-term fallout from Brexit had also fundamentally altered trade routes, the report revealed, with 72% of companies reporting complexities following Brexit prompted them to hunt for alternative markets outside the EU.
Citing data that showed 99% of UK exporters were “actively chasing sales growth”, Lumon MD Eliot Bassett said it was “deeply concerning” just 14% were “proactively looking at how they protect the money they make”.
The UK food and drink sector remained “a phenomenal export success story, powered by huge global ambition”. However, its “aggressive pursuit of international growth has an inevitable knock-on impact on currency exposure”, Bassett claimed.
Lumon’s report also highlighted how currency instability was “actively handicapping day-to-day business operations”. Nearly half of decision makers stated FX fluctuations created “highly challenging timing gaps between paying global suppliers and receiving customer payments”.
Some 45% admitted ongoing currency instabilities “directly reduce the capital they have available to reinvest back into business growth and critical research and development”, the report revealed.
This came despite “a remarkable sense of resilience and positivity within the sector”, it added, with 19% planning to launch new products or services in 2026, 17% expanding their UK sites, and 13% preparing to expand their overseas footprint.
While there was “underlying positivity” for growing export business among UK suppliers, “operating in overseas markets means businesses are walking right into volatile currency traps”, Bassett warned.
