Sterling continues its Brexit-inspired rollercoaster ride, with a further drop in value early this week, as talks between the UK and EU became increasingly fraught.
Following the vote to leave the EU in 2016, the pound lost 10 per cent of its value. By the time the UK finally left the union in January this year, sterling had recovered some of its value.
It was then affected by the economic turmoil caused by coronavirus. Since the pandemic took hold, the pound has remained weak against the euro, but strengthened against the US dollar as the virus hit America.
Lee McDarby, managing director of corporate international payments at Moneycorp, said: “With January’s new post-Brexit arrangements with the EU just around the corner and major uncertainty in the wake of Covid-19, the agriculture sector is facing significant changes in the way they trade with the EU and the rest of the world.
“Currency markets will continue react to the progress of the negotiations. So, with this in mind, farmers should prepare for a weak or fluctuating pound, which if neglected could result in currency exposure eating into their bottom line.”
He urged farmers to look at how exposed they are to currency fluctuations in both their income and outgoings.
Knowing this risk will allow the farm to develop a strategy which protects it from currency changes and could identify opportunities in a post-Brexit world.
He added a currency specialist will be able to advise on the best hedging instruments for the business and have access to better rates.
When the UK was a member of the EU, September was a key currency month for farmers as the value of pound against the euro during the 30 days was used to set the rate in which support payments were made.
This year payments are based on last year’s rate of €1 to £0.89092.