How UK Corporates are adapting FX strategies for 2026

For UK corporates, 2025 has marked a clear shift in the foreign exchange landscape. Shifting tariff regimes, higher labour costs driven by increased national insurance obligations, and sustained sterling volatility have pushed FX risk from a secondary treasury issue into a core strategic priority.

As a result, many FX risk management frameworks are under strain. Approaches designed for more stable market conditions are struggling to keep pace, exposing gaps in internal expertise as decisions around currency risk, liquidity and pricing become more complex and time-critical.

 

Key takeaways:

• What FX pressures are UK corporates facing as they head into 2026?
  Mixed profitability impacts from recent tariff changes, alongside rising FX costs and tighter credit conditions, are increasing pressure on treasury teams.
• What is driving the rise in hedging among UK corporates?
  Losses from unhedged currency exposure in 2025 have reinforced the cost of inaction, prompting wider hedging participation, higher hedge ratios and longer tenors.
• How are trade tensions and tariffs reshaping FX exposure for UK firms?
  Tariffs have prompted widespread operational change, with 97% of UK corporates adjusting sourcing or manufacturing strategies, introducing new currencies and increasing FX complexity.
• Where are manual FX workflows creating risk and inefficiency?
  Despite more sophisticated hedging strategies, FX trade instruction remains highly manual. A significant proportion of firms still rely on email (42%) and phone (40%).
• How are automation and AI reshaping FX risk management in the UK?
  UK corporates are prioritising automation across reporting, trade execution and end-to-end FX workflows. AI is increasingly being explored to support process automation, risk identification and FX risk management.

 

Tariffs reshape UK corporates’ supply chains and currency exposure

Shifting global trade policy has had an uneven impact on UK corporates. Almost half (48%) report a negative effect on profitability from recent tariff changes, while 44% have experienced a positive impact.

Compared with US peers, UK corporates have shown greater resilience. While UK firms report a near-even split between positive and negative outcomes, US companies have been far more exposed, with 69% reporting negative impacts and just 21% benefiting.

The most significant effect of tariffs, however, has been operational. An overwhelming 97% of UK corporates have adjusted sourcing or manufacturing strategies, with nearly half (47%) making substantial changes.

Despite this disruption, confidence remains high. More than four in five UK firms (84%) remain optimistic about the impact of US policy changes over the next 12 months, signalling a belief that strategic adjustments will ultimately strengthen competitiveness.

 

Hedging rises as UK firms seek stability

Nearly half of UK firms (48%) reported losses in 2025 from unhedged exposure. In response, hedging participation has climbed to 78%, as firms recognise that remaining unhedged can be extremely costly.

Corporates are also hedging more assertively. Average hedge ratios have risen to 53%, while hedge tenors remain elevated at 5.5 months.

At the same time, firms are reassessing how they hedge. Uncollateralised hedging has moved to the top of the priority list, highlighting a growing preference to manage FX risk without tying up valuable working capital.

Although hedging has become more difficult and expensive over the last year, it’s clear that UK corporates believe that not buying FX protection is the more costly option, given the potential losses they could incur.

Tom Hoyle, Head of Corporate Solutions

 

Firms turn to automation and AI to speed up FX workflows

Online interfaces are now used by 42% of UK corporates to instruct FX transactions, up 12 percentage points year on year. However, adoption remains uneven, with 42% still instructing trades by email and 40% by phone.

The divide is particularly pronounced by company size. Smaller businesses are more likely to use online platforms (47%), while larger corporates remain heavily reliant on email (58%) and phone (50%), despite often managing more complex FX workflows.

These inefficiencies are driving renewed investment in modern treasury tools. Automation of manual FX processes has become a top priority for nearly a third of UK corporates (32%), with key focus areas including:

• Reporting (36%): Reducing time spent on manual reconciliations and data consolidation
• Trade execution (35%): Enabling end-to-end efficiency and best execution
• Full FX workflow (33%): Streamlining the entire lifecycle of FX risk management

Artificial intelligence is also moving from concept to practical application. Firms are actively exploring AI to enhance process automation (42%), risk identification (42%) and risk management (41%), as pressure mounts to make faster, more informed decisions in volatile markets.

 

The biggest FX challenges heading into 2026

Despite clear progress in hedging strategies and growing interest in AI and automation, many UK corporates remain constrained by structural challenges that limit how effectively their FX risk can be managed at scale.

Limited internal expertise remains the most significant barrier. With 29% of firms citing gaps in specialist FX knowledge, outsourcing has become a key lever, with 34% turning to external partners. The primary drivers extend beyond skills alone, with efficiency and automation (34%) and improved scalability and flexibility (30%) also underpinning outsourcing decisions.

At the same time, access to credit is tightening. A quarter of UK corporates report growing difficulties in securing credit lines, indicating that tighter conditions and liquidity constraints are constraining FX activity.

Operational and financial complexity is also intensifying. Cost calculation has become a key challenge for 24% of firms as volatility and shifting interest rate differentials complicate forecasting, while an equal proportion point to fragmented processes across entities as a barrier to consistent risk oversight.

Overlaying these challenges are rising regulatory and compliance pressures. More than one in five corporates (22%) say shifting reporting expectations are adding complexity and driving up operational costs.

As UK corporates look ahead to 2026, those that invest in more transparent, data-driven and technology-enabled FX operations will be best positioned to protect margins, respond quickly to market shifts and turn currency risk from a reactive burden into a strategic advantage.

 

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