LONDON (Reuters) - Britain’s vote to leave the European Union sparked a doubling of currency hedging by small UK businesses, with more than half now using forward or options contracts to protect themselves from moves in the pound, industry research showed on Friday.
The anonymous poll of more than 1,100 companies by banking researchers East & Partners, conducted in August, showed 57.4 percent of small- and medium-sized businesses had used hedging products, compared with around a quarter before the Brexit vote in June.
Use among smaller micro businesses also rose, to 57.5 percent, from less than a fifth before the referendum, East & Partners said.
“The staggering increase in the use of FX hedging products by UK small business in the summer period just after the Leave Vote shows a lesson has quickly been learnt for a big part of British business,” said Simon Kleine, the researcher’s head of client services for Europe.
Sterling sank by around 10 percent in value immediately after the vote in June and another round of selling in the past three weeks has brought its losses to almost 20 percent in total GBP=D4.
A “flash crash” last Friday added to broader concerns about the stability of the currency in the face of Britain’s huge current account deficit, and the threat to foreign investment generated by negotiations with Brussels.
Editing by Larry King