Pound Volatility Triggers a Surge in FX Hedging Among UK Corporates

Published: December 11, 2025

Pound volatility is driving UK corporates to step up their FX hedging strategies, according to a new report from advanced FX and cash-management solutions provider MillTech.

Nearly half (48%) of businesses say they suffered losses due to FX swings over the past year, prompting finance leaders to extend hedge lengths (55%) and increase hedge ratios (37%) to protect their balance sheets.

The MillTech UK Corporate FX Report 2025, based on insights from a survey of more than 250 senior finance decision-makers at UK corporates, explores how organisations are reshaping their hedging strategies amid heightened FX volatility, rising costs and an expanding role for technology in managing exposure.

Sterling experienced sharp swings throughout 2025, hitting a four-year high against the dollar in early summer before reversing to its weakest monthly performance in three years. Influenced heavily by shifting global trade conditions and geopolitical uncertainty.

Corporates are responding by adopting a more proactive stance. Hedging rates have risen for their third consecutive year to 78%, up from 76% in 2024 and 70% in 2023. Among firms that are not currently hedging, 68% are now considering doing so in response to market conditions.

Businesses are also hedging more of their exposure. The mean hedge ratio has also grown to 53%, up from 45% in 2024, indicating that businesses are moving to protect greater portions of their risk. Meanwhile, hedge lengths remain elevated at 5.52 months, consistent with 5.55 months last year, but well above the 4.04 months recorded in 2023 and 4.95 in 2022.

This increased hedging activity comes as costs surge. The average cost of hedging climbed by 66% in 2025, and 17% of corporates say their costs have more than doubled, while 92% report an overall increase.

The research also shows that 53% of firms are very satisfied with the FX services offered by their primary banking partner or FX provider. Looking ahead, the most in-demand solution is a digital, multi-bank platform that offers advanced automation (26%).

Other findings include:

• Heavy reliance on manual processes
  Email is now the second most common FX execution method (42%), a ten-point jump from 2024, followed by the phone (40%), up six percentage points from last year.
• Expertise gap remains a major hurdle
  Limited internal expertise is the biggest challenge firms face when it comes to FX operations (29%), followed by securing credit lines (25%) and cost calculation (24%).
• Trade tensions impact
  48% of UK firms experienced a negative impact from trade tensions and tariffs, much lower than the 69% affected in North America, while 97% have adjusted their sourcing or manufacturing strategies in ways that impact FX. 84% of UK corporates are optimistic about the impact of Trump-era tariffs over the next 12 months.
• Increasing credit costs
  Over two-thirds (70%) said their credit provider had increased interest rates or fees in the past year, while 47% said they had tightened lending criteria.
• Strong appetite for automation
  Automation is the second highest priority for UK corporates, with key processes targeted being reporting (36%), trade execution (35%) and the full end-to-end FX workflow (33%).
• AI at the centre of automation efforts
  AI adoption is accelerating, with key applications including process automation (42%), risk identification (42%), and risk management (41%).
• Outsourcing to access skills and scale
  Outsourcing remains crucial for businesses’ efficiency, with the key motivations being to gain access to specialised expertise (34%), enhanced efficiency and automation (34%) and scalability and flexibility in operations (30%).

Eric Huttman, CEO of MillTech, commented: “2025 has been a pivotal year for UK businesses as they navigate sharp swings in sterling and shifting global trade conditions. For many, there has been a realisation that staying partially or entirely unhedged carries financial risks that can no longer be ignored. Hedging has moved from a ‘nice to have’ to a fundamental part of managing currency exposure, and we’re seeing firms take a more disciplined and strategic approach as a result.

“Yet many organisations are still reliant on manual processes at a time when they need to operate with more speed and certainty. Looking ahead to 2026, we expect a significant shift towards smarter, more automated FX operations. The firms that embrace these tools will be better placed to act quickly, improve accuracy and protect themselves in an increasingly unpredictable market.”