One of the most globalised industries, food and drink heavily relies on the vast international supply chain and on trading internationally.
Whether it’s importing or exporting food and drink, the amount you and your business pay is hugely affected by changes within the foreign exchange market. Understanding these changes within the foreign exchange market, as well as its risks and opportunities, can have a critical impact on your bottom line.
What contribution does the food and drink industry make?
The food and drink industry is the biggest manufacturing sector in the EU, both in terms of the number of people that it employs (4.82 million) and the value that it adds to the wider European economy: the European Union is the world’s largest exporter of food and drink products, with exports reaching €120 billion and a trade surplus of €44 billion.
This sector is also the largest manufacturing sector in the UK: it contributed £28.2bn to the UK economy in 2020, accounting for 17% of all UK manufacturing GVA. The industry is broad in scope, comprising more than 6,800 businesses and employing almost 400,000 people, and it enjoys an enviable international reputation. There’s no question that the food and drink sector plays an integral part in driving the UK and EU economies.
How international payments can affect the UK food and drink industry
As with everything imported and exported, the value of food and drink can differ greatly before and after currency market movements, whether the price has changed or not.
If you are receiving a payment in a currency that has recently moved upwards against the pound, then you can expect to receive less in revenue as a result of converting your funds. Moving exchange rates can ultimately affect every cross-border payment you make, whether to an overseas supplier, international overheads or staff based abroad.
In addition, exchanging your money with a high street bank could damage your bottom line further with a poor exchange rate and costly transfer fees.
How we can help your business save money
At moneycorp, every food and drink business is assigned an account manager who understands the ins and outs of your sector and will guide you through potential currency volatility to ensure you are offered a full range of foreign exchange solutions tailored to your business needs.
These include the ability to lock in a prevailing exchange rate for up to two years with a currency forward contract (this may require a deposit), as well as the option to secure an FX order and target a desired rate at which to make your payment. This is ideal if you are in no rush to make the payment and wish to wait for a potential currency movement, as we will automate your payment as soon as the rate reaches your set level.
Taking into account the demands of your business, we will monitor the market for you and keep you best informed of how far your money can go with a tailored solution.
How has Covid-19 affected the food and drink industry?
While initial concerns for the FMGC industry was the UK’s exit from the EU, the Covid-19 pandemic was a cause for concern as the sector dealt with extreme stockpiling, supply chain adaption and changing consumer demands.
Read our whitepaper on embracing the global food & drink industry during a period of extensive change here.