£2.3 billion wasted by UK companies on non-EU international payments
UK companies wasted more than £2.3 billion on non-EU international payments in 2014, according to a report from FXcompared Intelligence, the independent research division of FXcompared. A lack of awareness of better bank rates or non-bank foreign exchange and international money transfer services is revealed to unnecessarily add billions of pounds to the cost of exporting and importing, with SMEs suffering disproportionally.
The research estimates that UK companies exporting goods outside the EU needlessly incurred upwards of £670 million in unnecessary direct currency-related transaction costs in 2014. For UK importers sourcing goods from non-EU countries, the amount is upwards of £1.6 billion.
The figures are particularly startling, given that SME revenue from international trade and dealings with non-EU suppliers has significantly increased in recent years and this does not look like slowing. This will drive demand for non-euro foreign exchange transfers and compound the already expensive problem of non-EU payments.
Efforts to mitigate concerns are often limited, whether through lack of knowledge about, or access to, financial products and services that have the potential to reduce challenges and costs associated with paying or invoicing in foreign currencies.
Jonathan Hyman, Chief Economist, FXcompared Intelligence, said: “Smaller businesses, especially those in specialist sectors, often do not have the scale and capacity to manage their international transactions and currency risk effectively, and they are often not well served by their banks. This significantly adds to the cost of doing business with customers and suppliers outside the UK.”
The company’s Managing Director Daniel Webber said: “Currency volatility and foreign payments risk are cited by UK SMEs as two of the major obstacles to trading internationally, but are too often seen as ‘inevitable’ costs of dealing with foreign currencies. This does not have to be the case, however. As SMEs continue to increase their international footprint, understanding how to manage international payments more efficiently – and how to access risk-mitigating currency products and services – will be key in limiting foreign exchange-related costs.”
The research can be downloaded here
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.