How is the global landscape for buying and selling machinery changing?

The last few years have been anything but quiet in the world’s economic market, and the ripples have been felt far and wide in the agriculture, technology and energy sectors.

It’s resulted in business owners paying more attention to their annual budgets than ever before, as they try to map out what the next five years will look like for their enterprise.

Of course, when weighing up costs, it’s essential to consider what short-term investments are worth making for long-term success, and in particular what equipment your company needs to help secure its future.

Faced with the challenges our current economy presents, it’s likely many will find this a difficult quandary to solve when entering the new buying and selling period.

However, the insights offered below by Reece Dye, head of corporate dealing at Clear Currency, could help to shine a light on the situation.

Q: Why is it worth investing in new high-spec machinery and equipment?

A: Despite the initial outlay, it can help to boost your business’ long-term productivity, efficiency and profitability. I think a significant challenge for businesses right now is that they need to learn to work smarter, more sustainably and consider how best to utilise the resources on offer.

Smart-farming technology, such as the Internet of Things (IoT) devices, can collect real-time environmental metrics with the potential to improve almost every aspect of a farmer’s work. It can help them to keep up with food production demand, lower costs, reduce waste and increase product quality.

Green technologies and equipment will also be essential for helping companies to reach climate change commitments made by the countries who attended COP26 in 2021. To avoid fines from the Environmental Agency, businesses need to consider what equipment can help to ensure they meet these goals.

Q: What are the most popular countries for UK businesses to source equipment?

A: Brexit trade deals have impacted machine sales around the world. However, Italy, China and Germany continue to be among the top countries for UK businesses to purchase equipment from.

Q: Has Brexit had any other impact on UK machinery imports?

A: Since leaving the EU, farmer subsidiaries have been dissolved. Previously, the EU would pay money to farmers every January, which they could, if they chose, apportion to new equipment purchases.

With this no longer the case, many farmers are buying less and delaying purchases. Instead of replenishing equipment in cycles of five to 10 years, businesses are more reserved in committing to such purchases and would prefer to retain more liquidity in the bank.

Brexit has had a huge knock-on effect between trade and financial services. The UK government is in talks with the EU to help smooth over this transitional period, but nothing is yet set in stone, and we still don’t fully understand the ramifications of Brexit. It’s likely to be several years before we realise the true extent of how Brexit has affected businesses and consumers.

Q: How have rising living costs and Covid-19 affected global manufacturing and supply chains?

A: The pandemic slowed the world’s economy and clogged supply chains. This led to shortages, delays and higher shipping costs. Coupled with rising inflation, many are now seeing the prices for overseas purchases shoot up. It is therefore essential for businesses to consider these extended delivery times and increased costs when purchasing equipment from abroad.

The Bank of England is expected to raise interest rates further, meaning businesses will need to weigh up what is a good investment for them in the short-term vs. the long-term to ensure their capital is being used wisely.

It is difficult to attribute any one particular event to the state of the current market. It’s instead a culmination of many events that have occurred in close proximity over the last five years.

Eastern Daily Press: Internet of Things (IoT) devices collect metrics, like weather conditions and soil quality, that farmers can use to streamline operations and cope with current labour shortages.Internet of Things (IoT) devices collect metrics, like weather conditions and soil quality, that farmers can use to streamline operations and cope with current labour shortages. (Image: Getty Images/iStockphoto)

Q: What risks are involved when purchasing equipment from another country?

A: Currency risk exposure is one of the main things to consider when making transatlantic machinery purchases. Exchange rates are in a constant state of flux, meaning values can rise or fall at any time.

If the currency rate moves during the time a sale is being agreed, shipped and delivered, it can drastically affect the amount a business may end up paying.

It can take up to anywhere between three to six months for overseas machinery sales to be completed and delivered. Typically, you see longer lead times with high-value items and different suppliers work under different terms. Most require a 30 per cent payment upfront, and the other 70 per cent is settled upon delivery.

During a three-month period, currency rates will inevitably fluctuate. However, in the current climate, we've experienced moves of up to six per cent, which historically is extremely uncommon in a relatively short period of time. If businesses aren't placing adequate protection they could end up spending more than they budgeted for, and in some circumstances more than they can afford.

SMEs should be considering strategies to mitigate the risk of currency fluctuations. Tools such as forward contracts are an effective way to mitigate currency risk by locking in a fixed price for a set period of time.

Q: How can using a currency specialist like Clear Currency help businesses when buying equipment abroad?

A: Due diligence and forecasting are going to be key for businesses over the next 12 months. They need to begin the financial year with an understanding of their currency exposure and how the currency volatility could affect them, with a view to developing strategies that will protect them from adverse market movement.

Our team of dedicated account managers aim to work alongside businesses to discuss an appropriate cost/price budget rate, implementing a tailored strategy that is cost-effective and matched to the client's risk appetite.

When transferring large sums of money overseas, it’s essential to be aware of current exchange rates and make sure no hidden costs are involved. Clear Currency offers favourable exchange rates, same-day international transfers and transparency with fees.

We get to know the intricate mechanics of every client’s business and can provide key currency insights to help make their future goals obtainable.

Consulting the right experts will play a vital role in helping businesses overcome future obstacles and compete on the global stage.

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