Business Risk Report - February 2010

Lloyds TSB Corporate Markets’ half yearly Business Risk Report shows:

  • Almost 90% of British businesses lack hedging strategies against financial risks
  • Concerns over FX, inflation and commodities on the rise
  • Business confidence recovers to a 2-year high

Almost nine in ten British businesses say they have no hedging strategies in place despite increasing concerns about financial market risks and their potential negative impact, according to the Business Risk Report from Lloyds TSB Corporate Markets, now in its second issue.

The report, which captured the views of 1,732 businesses across the UK , shows close to 90% lack any measures against financial market risks. Yet, despite this, 55% of companies are more concerned than six months ago about the impact of foreign exchange movements, a significant increase compared to 45% in the last survey. Nearly half (49%) of companies said they were more aware of commodity price risks, up from 41%.  As for inflation risks and interest rates volatility, the apprehension is stable at respectively 27% and 21%.

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However, companies’ adoption of hedging strategies designed to mitigate the impact of financial risks remained low. Only 12% had strategies to hedge FX risks, marginally more than the 11% of respondents in the previous survey. Other hedging strategies’ popularity was slightly down, 10% for interest rate risks (vs. 11%) and 7% for commodity prices (vs. 9%).  Interestingly, only 5% of companies have hedging in place to deal with the negative impact of inflation compared to 7% previously.

At the regional level, the report highlights some large differences.  For example, 63% of companies in South Wales are concerned about commodity prices while the figure is only 39% in the Thames Valley .  In Scotland , 27% worry about interest rates compared to 18% in the South West and 19% in the Midlands .

Across industry sectors, companies in the wholesale sector are the most concerned about FX risk at 74%, and consequently 26% have FX hedging strategies in place. Manufacturers are also better prepared with 22% of those companies engaged in FX hedging and 12% actively mitigating the impact of commodity prices.

Read the full report

Reactions to report

Trevor Williams, Chief Economist for Lloyds TSB Corporate Markets provides his reaction to the survey findings. Play now

 

 

Previous Reports

September 2009

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The Business Risk Report is based on the responses of 2,564 companies surveyed via Lloyds TSB Commercial Business in Britain May 2009 questionnaire.