The FX Factor Report from foreign exchange and currency risk management specialist, Lumon Corporate, highlights the pressure profit margins are under as a result of geopolitical unrest and volatile supply chains, with one in four feeling margins are under more pressure than even a year ago.
On average, businesses are operating at just a 11.7% net profit margin, with 45% reporting margins below 10%, and 18% achieving less than 5%.
Given the sector’s reliance on imports and exports, these margins are very susceptible to currency fluctuations.
Nearly half (47%) of manufacturers say foreign exchange (FX) fluctuations have led to challenging timing gaps between paying suppliers and receiving customer payments, exposing them to exchange rate movements.
According to the report, 3.33% of net profits were wiped out across the sector last year as a result of fluctuations.
For those with margins below 10%, currency movements reduced their profitability by a third. For those below 5%, it will have almost removed profitability altogether.
Cautious with capital
Currency uncertainty is impacting working capital too, the report warns. Despite wanting to invest more, 46% of the respondents say they feel they have to hold higher cash buffers than normal, while 45% report instabilities reduce their funds available for investment and growth.
At the same time, 37% are finding cashflow forecasting much more difficult, and 18% claim retail customers expect them to absorb all FX movements.
“Currency risk is a real concern for UK manufacturers, now more than ever. With pressure at both ends of the supply chain, businesses stuck in the middle are being forced to take on the costs, while keeping theirs the same,” said Eliot Bassett, managing director at Lumon Corporate.
No action being taken
The report highlights a major disconnect between the threat to business survival and action taken to manage FX risk, with 74% of decision makers revealing they do not review their FX strategy regularly.
Geopolitical events are not going to stop, they are becoming the norm, so businesses need to adapt to survive, and do so quickly.
Eliot Bassett, managing director, Lumon Corporate
Just 14% of manufacturers plan to review their FX strategy in the next 12 months and only 22% are managing FX risk through a specialist provider.
More than half (59%) also indicated that they weren’t using FX hedging and other tools at all, which Lumon flags as “vital” for managing and reducing FX risk.
“Our findings clearly demonstrate that UK manufacturers are missing out on critical support and expert insights when managing profit margins across multiple currencies,” added Bassett.
“And as companies, both big and small, are being forced to absorb often significant financial fluctuations from their entire supply chain, what is clear is that businesses must turn to the dedicated risk management services and tools that are at their disposal to help them understand their FX risk, set up properly managed frameworks and policies, and, ultimately, weather the turbulence that the industry is currently facing.”
The report is based on independent research conducted by Censuswide in February 2026 among 100 financial decision makers (founders, MDs, CFOs, finance directors, or treasury managers) within UK F&D companies that import or export at least £4 million of goods annually.
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