UK pharmaceutical market hit by losses due to poor FX management

UK medicinal and pharmaceutical companies are being hit with substantial losses as a result of poor foreign exchange (FX) management when exporting goods overseas, according to an expert in the field.
 
The medicinal and pharmaceutical market is one of the UK’s biggest exports, with £26.3 billion being exported in 2017 – the fourth largest commodity exported by the UK, according to Statista. 
 
Like many industries, the sector is faced with uncertainty surrounding Brexit and growing frustration at the pace of Brexit talks. Changes to regulations and tariff burdens on pharmaceutical trade are major concerns to industry leaders. Add to this the struggle of managing FX exposure when exporting goods internationally and those leading medicinal and pharmaceutical firms are left with potentially major impacts to their bottom lines.
 
Corporate leaders often don’t have the time or resources to dedicate to this area of their business. As a result, medicinal and pharmaceutical companies are continuously losing out on thousands of pounds, especially if they don’t seek the best deal.
 
Paul Langley, managing director of Swansea-based FX firm Godi Financial, claims a key obstacle for businesses within the pharmaceutical sector with currency exposure is currency management. He suggests these organisations should take the time to seek the best currency transfer rate, as rates from firms like Godi are often a fraction of the cost of major UK banks.  
 
With £26.3 billion of medicinal and pharmaceutical products being exported by the UK last year and UK banks often charging a standard FX margin of 2 per cent, over £526 million of this export value is being lost by pharmaceutical companies through transfer fees. If a transfer rate of 0.5 per cent had been secured, which is the maximum rate Godi typically charges, over £394 million could have been saved by pharmaceutical firms.   
 
As well as securing the best rate, Langley also suggests medicinal and pharmaceutical organisations have a clear currency hedging strategy in place that accounts for all known costs and exposure, turning otherwise variable costs into a fixed cost to the business.  
 
Langley said:
 
“Corporations in the pharmaceutical sector are losing out on millions because they do not have appropriate FX knowledge or a robust FX strategy in place. These firms need to be aware of what they are losing out on when dealing with overseas markets and understand how their FX rates are being managed – if at all.
 
“It’s surprising that even larger businesses are instantly losing a substantial amount of money as a result of agreeing to a standard transfer rate instead of looking for a better deal that could save them a lot of money. I find it disappointing that so many pharmaceutical businesses are still being stung with hidden transfer fees due to a lack of transparency from their FX service provider.
 
“We aim to educate businesses on how they can minimise financial loss through transparent FX management and offer a transfer rate that is marginal compared to major players in the financial sector. We want to create some certainty for pharmaceutical firms so their profits aren’t negatively impacted when it comes to FX.”