Capture Spanish export opportunities

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Spain presents an accessible and attractive export opportunity for UK businesses.

 

The country’s growing familiarity with British products is combined with an increasing ease of doing business. The World Bank Group records Spain’s Ease of Doing Business Rank as having risen to 33 in 2016, up from 52 in 2013.

In 2014 Spain’s share of UK exports was equivalent to Poland, India and South Africa combined, at 3.1% or $14.5B, with the majority being from automotive, aerospace and pharmaceutical sectors. Some UK businesses are capitalising on this export opportunity but there are still many more being held back by limited access to the right financial solutions.

Our team in the UK, supported by our Spanish team in Madrid, notes the concerns regularly brought to us by our SME clients.

 

Payment terms

UKTI states that one challenge for UK businesses exporting to Spain is the ‘long payment terms, with many organisations working on 90 to 120 payment days’.

One way experienced exporters mitigate the impact of lengthy payment terms is by alleviating cash flow issues on the other side of the trade cycle.

Using an unsecured, revolving credit line linked to supplier invoices, is a common solution.
It does not need to impact any accounts receivable finance arrangements and can increase the number of export clients you can viably trade with. In this way, UK businesses can offer a reliable service to their Spanish customers.

It’s well known that SMEs, just like large corporates, need currency risk management strategies when trading internationally. However, what’s not often mentioned is the huge deposits many financial institutions require from SMEs in order to secure these forward contracts. Finding a foreign exchange provider with better credit terms will ease cash flow requirements and lift the pressure of delayed customer payments.

 

Brexit uncertainty

 

'The Brexit vote has led to one of the most volatile, uncertain periods of currency trading in recent memory.' - Enrique Diaz-Alvarez, Chief Risk Officer at Ebury

 

Many businesses employed extensive currency risk management strategies in the build up to the EU referendum, locking in favourable exchange rates before the more severe volatility began.
The exchange rate continues to fluctuate widely, with the potential to erode margins, so businesses should continue to hedge.

Because of this it’s important to work with a foreign exchange provider who understands the specific risks involved in trading with Spain and can provide expert insight into the local economic and political factors driving your currencies to ensure you protect business margins.

 

 

 

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