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Sterling could drop to 97p against the euro if no trade deal struck

Small and medium sized companies are generally showing signs of
resilience in the current challenged trading environment, but there are
concerns for particular sectors.

That is according to a treasury specialist who works with businesses
on managing capital, cash flow and currency moves among other things.

John Finn, Managing Director of Treasury Solutions, said the bulk of
the concern was sectoral driven with hospitality and hotels in a
particularly difficult position.

However, he said the twin threat of the pandemic and the possibility
of a no trade deal with the EU when the UK leaves the single market and
customs union in 65 days time could pose difficulties to other sectors.

“Food processing and manufacturing have done fine in the sense that
people are still eating, but they’ll get hammered if they’re exporting
to the UK and there’s a hard Brexit,” John Finn said.

He noted that sterling had been trading in a reasonably narrow range against the euro of late with currency traders appearing to believe that a trade deal of some kind will eventually be struck.

“If that happens, you’d probably expect sterling back at 87-88 pence
(to the euro). That’s what exporters are hoping for. If there’s no deal,
95-97 pence would be inevitable fairly quickly so that’s the risk. On
balance, I’d say exporters are probably hoping more than hedging that
they’ve got it right,” Mr Finn said.

He said it was too early to say if the banks were dealing with
customers on a “case by case’”basis as they had promised after the
pandemic payment breaks ended.

However, he believed that the bigger concern for many SMEs was landlords more so than the banks.

“There’s a general sense that the rent breaks were fine and there’s a sense that no landlord wants to move first on moving somebody but if you get a couple moving, you could get a lot of them moving. In the short term, there’s more concern about rents than bank loans,” he added.

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