Brexit, despite temporary perturbations, has not slowed Polish-British trade flows, which Polish statistical office, GUS, confirms. In the first half of 2022, Polish companies sold goods worth 37.7 billion złotys to the UK (+22% y / y). This is about 7 billion złotys more than in the first half of 2019 – before the pandemic the departure of the UK from the single European market. The biggest category of Polish exports to the UK is now food, but trade covers a much wider range of goods. The UK is now Poland’s largest non-EU export destination, although overall it has fallen from second place to fourth (after Germany, Czechia and France).

The road that exporters and importers travel on a daily basis has never been a bed of roses. And even if it is, it is now much easier to find thorns – hence you have to tread even more carefully than before. The biggest challenges in the area of finance include rising costs of doing business, including higher financing costs, as well as exceptionally large currency fluctuations. One of the key problems is the declining access to financing, related to the increase in interest rates in Poland and the decreasing creditworthiness of SMEs in the light of banking regulations. General geopolitical risks and the spectre of an economic downturn limit access to business loans.

I’d like to share a few tips to help you better protect and grow your business despite the adversities.

Hedging the exchange rate

I believe that more and more companies, importers and exporters, will be looking for ways to reduce currency risk, including securing the exchange rate using hedging transactions, mainly forwards.

After the outbreak of the war in Ukraine, the exchange rate of the złoty against major currencies began to be subject to considerable pressure and fluctuation. Contrary to popular opinion, a significant weakening of the Polish currency is not unequivocally beneficial for exporters. In the short term, favourable exchange rate movements may help them, but in the long term, rapid fluctuations make business unpredictable. Attempting to play roulette with the market may completely deprive the exporter or importer of a margin, and even risk losses.

This effect has been experienced in the last two years mainly by importing companies, those that buy euros or dollars for złotys to pay their trading partners. Only a few of these businesses hedge their currency risk or even have any policy in this regard! Those counting on a change of situation, a trend reversal or some intuition are often wrong-footed by events. Occasionally they may be successful, but luck has nothing to do with a structured way of doing business and in the long term is not a good method of risk management.

The predictability of the exchange rate of the selected currency pair such as GBP / PLN, can be ensured by the firm thanks to a forward transaction in Ebury. In a fixed period up to three years, the firm will be able to buy / sell the currency according to the exchange rate previously agreed with Ebury. As a result, market fluctuations in the selected currency pair will not matter to them, allowing the business to plan cash flows better.

Choosing the local currency for settlements

The ability to carry out transactions in local currencies in which customers or suppliers operate on a daily basis is the second way to counteract the increased currency risk. Instead of paying China in US dollars, you can make the payment in Chinese yuan, or invoice a Nigerian importer in Nigerian naira, which will make the payment much easier for your recipient.

If appropriate settlement tools are used, this form makes sense for both parties to the transaction. At Ebury, firms can make settlements with contractors from dozens of countries and receive payments in 35 currencies.

Foreign partners of Polish companies can additionally reduce the costs of bank transfers – by sending funds in the local currency to the foreign currency account of the Polish company in the country of sale, they pay as for a domestic transfer. Ebury opens clearing accounts in local currencies in nine countries and of course in EUR in eurozone countries. Therefore, the benefits of switching to settlements in the local currency open the way for Polish exporters to negotiate prices and increase margins.

Polish entrepreneurs trading with companies in the UK should also note that the use of settlements in pound sterling through local accounts there will significantly accelerate the booking of funds on the accounts. Ebury is included in the British Faster Payments network. It is a settlement system that enables safe and very fast settlements in British banks. Thanks to this, an exporter of goods to the UK, who has an account in pounds in Ebury, will see the funds within a few minutes of the transfer by the British importer. This solution can help increase liquidity – which is at a premium these days.

Trade finance

Banks have begun to reduce lending to individual customers and to businesses. Cutting off capital in the form of, for example, working capital loans has become a serious challenge for many foreign- trade companies. The problem mainly affects importers who are afraid of freezing up capital in the period between payment for the goods (often still during the logistics process) and its distribution to end customers and obtaining payment.

This is one reason why Ebury has seen demand for trade finance increase significantly. It is enough for the company to provide an invoice from a foreign supplier with commercial documents, and Ebury will settle this payment, giving the entrepreneur up to five months to pay the liability. My observations show that in most cases it is enough time to sell the products ordered.

Thanks to trade finance, the company obtains additional funds that support its purchase financing needs and improve financial liquidity. An important feature of this service is its transparency regarding financing costs. The only expense associated with this solution is the monthly fee for each invoice paid. Costs are incurred in arrears, and financing is available in euros, dollars and pounds. Ebury does not charge setup fees or other additional commissions. Firms greatly appreciate the simple way in which they can take advantage of this service and the transparency of the price for this financing.

Support for companies from the e-commerce sector

Polish businesses see increasing opportunities to develop sales of goods online. Cross-border e-commerce significantly expands the target audience and allows firms to reduce costs related to, for example, opening brick-and-mortar stores in other countries. Modern methods and numerous platforms called ‘marketplaces’ enable access to recipients all over the world.

While the distribution of goods purchased online throughout the single European market is not a problem today, in many cases companies are struggling with challenges such as receiving payments (receivables from customers). The main problem is currency exchange, which generates additional costs, and is carried out by numerous online billing companies.

In this case, the Ebury service related to checking accounts that can be used (equivalent to bank accounts) in a situation where we need to collect our funds in many countries around the world in local currencies comes in handy. For example, when selling on a marketplace in the UK, Australia or Canada, we will receive a payment in the currency of these countries quickly and safely, we will choose the moment and the currency conversion rate to settle our trade obligations in any currency for the sale. In this case, we avoid various automatic currency conversions used by many payment operators.

All the Ebury solutions I outlined above are fully accessible to firms who want to grow their cross-border e-commerce business – through one integrated Ebury Online platform. In addition, the client receives a specialised personal service in Polish, a Polish-language registration process and professional support when using these modern services. At Ebury, we do not use helplines or automated bots, we believe that entrepreneurs need quality personal support and the possibility of consulting their needs.

The above-described challenges, as well as new ones, will certainly accompany firms in the coming quarters. However, if managers deal with them, they will have a chance to strengthen their position on foreign markets. Polish companies are flexible, creative and determined, so even with such a significant accumulation of unfavourable factors as today, they have every reason to conquer international markets. Working with Ebury can help to reduce transaction risks and costs, thereby protecting your profits and margins.