UK SMEs Drive Export Growth as Currency Risk Becomes a Bigger Business Priority

Small and medium-sized enterprises are playing a central role in the UK’s export economy, but growing international exposure is also increasing the need for businesses to manage foreign exchange risk more carefully, according to analysis from global financial services firm Ebury.

SMEs account for 99.9% of private sector businesses in the UK, employ around 16.9 million people and generate more than half of private sector turnover. However, only around one in nine UK SMEs currently exports goods or services overseas.

Government figures show that approximately 314,000 SMEs exported from the UK in 2023, representing around 11.6% of all UK SMEs. In total, around 318,000 UK businesses exported goods and services during the year.

HMRC data also shows that SMEs represent approximately 82% of UK goods-exporting businesses by number, highlighting the importance of smaller companies to the country’s international trading base.

While large businesses continue to account for the majority of overall export value, the data indicates that a significant share of UK exporters are small and medium-sized companies operating across a wide range of sectors.

International expansion brings new financial pressures

Selling into international markets can give SMEs access to new customers, more diversified revenue streams and wider growth opportunities.

However, operating across borders also exposes businesses to fluctuations in foreign exchange markets.

Companies importing materials in US dollars, buying from international suppliers or invoicing customers in euros can see their costs and revenues affected by movements in exchange rates.

For smaller businesses with tighter margins, even relatively modest currency movements can influence the profitability of an international contract.

This has made foreign exchange management an increasingly important part of financial planning for SMEs operating globally.

Managing currency volatility

Businesses trading internationally can use a range of approaches to reduce uncertainty around currency movements.

These may include forward contracts, foreign exchange market monitoring and structured risk management strategies designed to provide greater visibility over future currency costs.

Better management of currency exposure can help businesses forecast cash flow, price products more confidently and protect profit margins when exchange rates move unexpectedly.

As international trade becomes increasingly accessible to smaller companies, foreign exchange management is becoming less of a specialist concern and more of a core business consideration.

Phil Monkhouse, UK Country Manager at Ebury, said:

As SMEs continue to grow internationally, financial resilience will become an increasingly important competitive advantage. While exchange-rate movements cannot be controlled, businesses can take proactive steps to manage their exposure and reduce uncertainty.

The latest data serves as a reminder that Britain's small businesses are not only the backbone of the domestic economy - they are also playing a vital role in the country's international trade. Ensuring they have the tools to manage foreign exchange risk will help them compete with greater confidence in global markets.”

UK SMEs and international growth

Despite wider economic uncertainty, international markets continue to offer significant opportunities for British SMEs.

Hundreds of thousands of smaller UK businesses are already exporting products and services, while many others may have the potential to expand internationally.

For these businesses, long-term export growth will depend not only on acquiring customers and entering new markets, but also on managing the financial risks associated with operating across multiple currencies.

As SMEs become increasingly international, protecting margins and maintaining financial resilience are likely to remain important factors in sustainable global growth.

About Ebury

Ebury is a global fintech company providing financial services designed to help businesses operate internationally.

Its services include international payments, foreign exchange risk management, business accounts, financing and API-based financial solutions.

Founded in London in 2009 by Juan Lobato and Salvador García, Ebury operates across more than 45 offices in over 30 regulated markets and is regulated by the Financial Conduct Authority in the UK.