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Foreign Exchange Services for UK Businesses Overseas

The UK was once regarded as the “workshop of the world”, and exports still account for a substantial portion of UK manufacturing and commercial activities today.

Overseas trade has been a significant buffer for UK companies as domestic markets have dried up or reversed in the recent recession; however, doing business overseas does present several unique challenges, not least being able to deal in overseas currencies and protect your business against the risk of adverse foreign exchange movements.

Foreign Currency Bank Accounts

Practically all the major high street banks offer foreign currency denominated bank accounts which you can use in the same way as your Sterling-denominated accounts.  The only practical difference between the two sets of accounts is one is denominated in the foreign currency of your choice, with Euro and US Dollar accounts being the most popular, though a wide choice of currency options are available.

You can establish current business checking accounts, currency call deposit accounts (which pay some interest but still allow you to withdraw without notice) and Treasury Deposits (which require you to keep the money in the account for a fixed period, which can be as little as one day, but which give you fixed interest rates, favourable foreign exchange rates and a raft of other benefits).

International Money Transfers

International money transfers are used primarily with business banking units and involve sending money overseas for use with local currency.  Money transfers are ideal for individual or urgent transactions, however they do not generally provide for favourable foreign exchange rates and typically come with relatively high transaction fees.

Trading within the Euro-zone is simplified with the SEPA service (Single Euro Payments Area) which is available by fax or personal visit to a business banking branch.  Payments typically take four working days to clear within the Euro zone.

Spot Deals

Spot deals are available from banks and specialist foreign exchange currency dealers, and British businesses are in an advantageous position because London is the leading forex centre of the world.  There is immense choice of providers available and a very high degree of competition for your business.

A spot deal is simply a transaction to buy or sell foreign currency at the prevailing rate, at some point in time, perhaps immediately but also at a future date.  The problem is that no-one can predict what the prevailing rate will be in the future, and if the exchange rate moves against you this could prove costly.  In short, you are taking the forex risk on your own shoulders.

Forward Contracts

A forward contract removes the risk associated with fluctuating currency exchange rates by fixing what the exchange rate will be in advance.  If the rates move against you, you are locked in to the rate fixed in the contract- however, if the exchange rate moves in your favour you will not benefit from the better rate.  By using currency options and other derivative products, a solution can be engineered which will allow you to take advantage of beneficial exchange rates without exposing your business to the risk of losing money with adverse movements, though this type of agreement is generally best left discussed by the companies specializing in it.



1 GBP = 1.221 EUR
2.513 AUD - Australian Dollar
2.361 CAD - Canadian Dollar
12.456 HKD - Hong Kong Dollar
2.694 SGD - Singapore Dollar
9.835 ZAR - South African Rand
2.539 CHF - Swiss Franc
1.601 USD - U.S. Dollar

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