Currency chaos wipes third of UK food & drink profits
Currency volatility is hitting profits hard in the food and drink (F&D) sector. For the 45% of businesses operating on tight net margins below 10%, this ‘invisible’ ceiling effectively slashed their overall profitability by a third, new research reveals.
According to The FX Factor Report, a report on the F&D industry by leading foreign exchange and currency risk management specialist, Lumon Corporate, 99% of UK F&D exporters are actively chasing sales growth this year but currency volatility is hitting profits hard. It also demonstrated that currency fluctuations wiped out an average of 3.33% of net profits across the sector last year.
Despite currency volatility posing a direct threat to business survival by creating severe cashflow timing gaps and reducing growth capital, an ongoing disconnect remains in how the sector manages this risk. While the vast majority of firms acknowledge the severe impact of currency swings on cashflow and margins, only 14% of businesses plan to actually review their FX strategy over the next 12 months.
The report also highlights a dramatic shift in global trading as UK F&D companies attempt to navigate complex geopolitical landscapes. F&D companies are now three times more likely to see major export opportunities in China (29%) than in the U.S. (11%). This sharp drop in enthusiasm for the US market follows recent tariff impositions, high compliance costs, and unpredictable market access linked to geopolitical uncertainty.
The long-term fallout from Brexit has also fundamentally altered trade routes. 72% of F&D businesses report that complexities following Brexit prompted them to hunt for alternative markets outside the EU. This has fuelled a surge of interest in trading with South America, with Brazil emerging as a primary focus for 28% of those who changed their sales strategy.
Eliot Bassett, managing director at Lumon Corporate, comments: “The UK F&D industry remains a phenomenal export success story, powered by huge global ambition. However, this aggressive pursuit of international growth has an inevitable knock-on impact on currency exposure.
“It is deeply concerning that while 99% of the sector is pushing for expansion, only 14% are proactively looking at how they protect the money they make.”
The report further reveals that currency instability is actively handicapping day-to-day business operations. Nearly half of decision makers state that FX fluctuations create highly challenging timing gaps between paying global suppliers and receiving customer payments. 45% admit ongoing currency instabilities directly reduce the capital they have available to reinvest back into business growth and critical research and development.
Despite these headwinds, the report highlights a remarkable sense of resilience and positivity within the sector. UK F&D companies are pushing forward, with nearly one in five (19%) planning to launch new products or services in 2026, 17% expanding their UK sites, and 13% preparing to expand their overseas footprint.
Bassett concludes: “While there is underlying positivity across the UK’s F&D sector right now, operating in overseas markets means businesses are walking right into volatile currency traps. Leaving your profit margins at the mercy of sudden exchange rate shifts is an unnecessary gamble when dedicated risk management services and tools are readily available to support businesses.”