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Entrepreneurs Panel

Steve Purdham
Laura Tenison
Tony Caldeira
Michael Oliver
Jeremy Roberts
Brian Hay
Debbie Pierce
Julie Meyer
Jennie Johnson
Richard O'Sullivan
Charlie Mullins
David Pollock

UK credit downgrade 'will hurt SMEs'

Small and medium-sized firms that import or export could suffer from the decision to downgrade the UK's AAA credit rating, according to one expert.

Harry Geller, senior FX manager at the Currency Cloud, which provides cross-border payments services for businesses, said Friday's decision by credit rating agency Moody's has already seen sterling weaken against the US dollar and the euro - and this downward trend could continue on a "sustained basis".

"Import prices will rise, impacting consumer goods. This unfortunately will lead to higher inflation," he added.

"While UK exports will become cheaper and more attractive, small and medium-sized businesses that export or import may suffer from the downgrade decision.

"Volatility of the GBP will make the forecasting of cash flow difficult for British businesses. SMEs should hedge their currency risk and book exposure on to forward contracts. By taking measures against currency risk, businesses will be able to budget more efficiently and protect themselves from adverse market conditions."

Elsewhere, Robin Chater, secretary-general of the Federation of European Employers, has claimed the downgrade is a result of the Government losing its focus on growth in a "fog of pettiness" - and he called on George Osborne to slash corporation tax to stimulate the economy.

He accused the Chancellor of being "far too concerned" with admonishing the City of London's financial institutions for the Libor scandal and international companies for seeking to minimise tax liabilities, while failing to focus on the big picture.

"The licence for greed of the 80s and 90s has turned into a culture of envy in which income distribution is far more important than the generation of the wealth that gives rise to the income," Chater said.

"The downgrading of the UK's credit status is a blow for the UK as a leading financial centre and the UK balance of payments is so reliant on its financial services that even a small loss in trading income could affect the value of sterling and have a major impact on GDP.

"Regaining international confidence by further Government spending cuts is going to take far too long to affect the economic fundamentals and could harm public confidence if it reduced the quality of public services

"The key to growth - and the UK's huge balance of payments deficit in goods - is to focus on manufacturing. The UK could regain its manufacturing strength quickly if the UK established the right climate for investment. Such a climate will not be achieved if the Government remains preoccupied with corporate tax avoidance."

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