Bank fees add to Brexit woes for UK importers
23 September 2016 | 5062 views | 0
Since the UK’s referendum on EU membership took place three months ago today, it is unclear if ‘Brexit’ has had a major impact on Britain’s overall economy yet.
However, since the Brexit vote, UK importers have been hit the hardest out of all businesses in Britain due to the decision to leave the EU.
• Quickly after the vote, sterling plunged to a 31 year low against the dollar and a 10% drop in trade-weighted value
• Overall, the currency is down 16% year-on-year (YoY) against the dollar - £1/$1.31 and 18% YoY against the euro - £1/€1.18
• These huge plunges in the value of sterling, currently for UK importers means costs for conducting their businesses have shot up by up to 16-18%
• Meanwhile, EU imports decreased sharply by nearly £1 billion in July 2016, according to HMRC
UK Importers, Down, But Not Out
Doron Cohen, CEO of Covercy, a cross-border business payments service enabling up to 80% cheaper transactional fees than traditional banks said:
“Three months on from Brexit, it is clear that due to sterling’s volatility, importers have seen the cost of doing business shoot up to unprecedented and worrying levels, which actually threatens their survival. This week alone the pound fell further by 2.5% against the euro and dollar, severely hampering British importers abilities to do business even further.”
“However, the one positive trend to note is that non-EU Imports for July totalled £20.2 billion, an increase of over £500 million compared with the previous month, when the referendum vote occurred. This points to British importers looking beyond Europe and seeking to open up new trade routes with international partners in order to offset the damage of Brexit and keep their businesses afloat in this turbulent time.”
UK Importers Already Vastly Overpay On Overseas Transactions Due To Banks’ Fees
Meanwhile, research from Covercy today also reveals the extent to which UK importers have been paying well over the odds for international payments, hampering their abilities to expand in a post-Brexit world.
Overall, traditional banks have a stranglehold of 95% of the business payments market and SMEs:
• For each transaction of £1,000 overpay £55
• For each transaction of £10,000 pay over £106 in needless fees
• For each transaction of £30,000 pay more than £220 in unnecessary charges
This means importers are paying well over the odds to conduct overseas payments:
• One company making 20 transactions of £30,000 could overpay an average of £4,400 monthly or £52,800 a year in completely unnecessary fees
• For a company making 20 transactions of £10,000 this equates to £2,120 a month or £25,440 a year
• Meanwhile for a firm conducting 20 transactions of £1,000 this will total £1,100 a month or £13,200 a year
Doron continued: “Unfortunately for years, banks have held these firms hostage with over-the-top and unnecessary transaction fees for cross-border transactions. This is because 95% of the business payments market is controlled by banks and this stranglehold must be finally needs to be broken.”
“Brexit has already brought huge uncertainty to importers and the current cross border payments market is stifling the growth of in Britain at a time, when these companies need to be able to expand to survive and thrive.”