New research out this month gives us the clearest picture yet of how UK businesses are actually responding to two years of currency volatility. A survey of corporate treasurers found that average hedge ratios have climbed well past half of forecast currency exposure, and that businesses are locking in rates for longer than they used to. That is not treasury teams being cautious for the sake of it. It is a direct response to a run of unpredictable central bank decisions, an energy price shock and a wave of new tariffs that has made guessing the pound's next move a losing game. For businesses without a dedicated treasury function, the shift matters because it shows what more sophisticated players are doing about the same currency risk you carry, just without the resources to manage it as carefully.
The data shows average hedge length has grown by more than a month compared with two years ago, and over half of the businesses surveyed plan to extend it further still. That is a meaningful change in behaviour. A business that used to cover next month's supplier payment is now, on average, planning several months further out.
The reason is straightforward. When currency moves were smaller and more predictable, a short hedge was cheap insurance against a manageable risk. This year has delivered a run of central bank meetings that moved markets more than usual, an energy shock, and tariff changes, none of which were fully priced in ahead of time. Businesses hedging month to month kept finding themselves exposed to fresh uncertainty just as their previous cover rolled off. Extending the hedge window reduces how often that decision has to be made, and reduces how often a business is caught between one shock and the next.
The more striking finding is where new currency risk is coming from. It is not always the obvious source. The research found that the vast majority of UK corporates adjusted their sourcing or manufacturing arrangements over the past year, largely in response to tariff changes, and that almost all of those adjustments created currency exposure that did not previously exist.
This is easy to miss if you think of currency risk as something that only applies to businesses that deliberately trade internationally. If your finance team moved a supplier from one country to another to avoid a tariff, or shifted part of your manufacturing to a new region, you likely now carry exposure your existing arrangements were never built for. A business that has never held a forward contract in its life can find itself carrying meaningful exposure to a currency nobody was watching six months ago.
If your supply chain has changed in the past year, in supplier, country, or currency of invoice, treat that as a prompt to review your currency exposure, not just your logistics.
You do not need a treasury department to act on any of this. The research is also clear that the tool most businesses actually use is not complicated. A forward contract, which simply lets you agree today's rate for a payment due in the future, remains the most common way mid-sized businesses manage this risk, well ahead of options or more complex structures.
The practical steps are within reach for any business, however it is set up. Start by listing every payment made or received in a foreign currency over the next six to twelve months, including any new ones from supply chain changes that may not have been flagged as a currency matter. Then match the length of your cover to how far ahead you can see your costs and revenues with reasonable confidence. If you can forecast several months of overseas invoices with real accuracy, there is little reason to leave that exposure unhedged for lack of a formal policy.
None of this requires predicting where the pound goes next, which is just as well given how wrong that guessing game has been this year. It requires an honest look at where your business is actually exposed today, not where it was exposed when you last reviewed it. If it has been a while since you mapped your currency exposure, or if your supply chain has shifted at all in the past year, now is a sensible time to get it looked at properly. Speak with our team and we will help you see exactly where the risk sits and the most practical way to manage it.
Whether you have a formal FX policy or none at all, a short conversation with our team can show you where the risk sits and how to manage it without adding headcount.