The UK manufacturing industry has traditionally been one of the prime drivers of economic development, accounting for a substantial share of exports and jobs. But for small and medium-sized manufacturers (SMEs), growth in international markets is fraught with financial obstacles, such as access to funds and foreign exchange (FX) risk management.
SMEs in this industry are likely to need international funding to expand production, purchase new machinery, or lengthen supply chains. But to make cross-border transactions exposes one to currency fluctuations, high FX charges, and delayed payments from abroad. Without FX control, profit margins are put at risk, and the stability of businesses is jeopardized.
This blog discusses how UK manufacturing SMEs can obtain global funding sources, hedge against FX risks, and maximize international payments through KeyFX’s financial solutions.
Why UK Manufacturing SMEs Need International Funding
Industrial SMEs require large amounts of funding to remain competitive in international markets. The most important reasons for overseas financing include:
Investment in rising capacity – Punting money on new technology and automation to get the business leaner and more efficient.
Penetration into new markets for export – Scaling up business to deliver products to Europe, Asia, and North America.
Procurement of raw material – Procuring raw materials from overseas suppliers, meaning dealing in multi-currency business accounts vs. traditional business accounts.
Hiring skilled employees – Increasing staff to meet expanding needs in global markets.
Supply chain resilience – Diversifying dependence on a single region for supply or production of materials by placing suppliers around the globe.
International financing, however, is not easily attained. Banks and traditional lenders are cautious to lend money to SMEs with exposure in foreign markets due to perceived risk.
Funding Options for UK Manufacturing SMEs
UK manufacturing businesses that wish to export globally can access various finance opportunities:
A. Export Finance
The majority of UK SMEs employ the use of export finance, which provides finance against confirmed foreign orders. This helps the manufacturers cover cash flow gaps when working with large foreign customers.
B. Government Grants & Loans
Such firms as UK Export Finance (UKEF) and the British Business Bank lend to internationalizing SMEs. The schemes provide low-interest loans, trade credit insurance, and export guarantees.
C. Private Equity & Venture Capital
Product manufacturers with innovative solutions such as green technology or sophisticated engineering may be funded by venture capital groups or private equity investors seeking to invest in growth.
D. Trade Finance & Supply Chain Financing
Trade finance allows SMEs to pay ahead of time for suppliers while receiving extended payment terms from buyers, leveling out cash flow limitations.
But regardless of the funding instrument, SMEs must deal with the risk of currency exchange rates and FX conversion fees when making cross-border investments or payments.
FX Risks in International Manufacturing & How to Manage Them
For UK border-working manufacturing SMEs, exchange rate volatility can be a significant driver of profitability. A surprise devaluation of GBP vs. USD or EUR can make imports more expensive, driving costs upwards in an unforeseen way.
Common FX Risks for UK Manufacturing SMEs:
- Exchange Rate Volatility – Currency fluctuations affect the cost of imported raw materials and exported goods.
- High FX Conversion Fees – Traditional banks charge high margins on currency exchanges, leading to unnecessary costs.
- Slow Cross-Border Payments – Delays in international transactions can disrupt supply chains and cash flow.
How KeyFX Helps Manufacturers Manage FX Risks
A. Multi-Currency Accounts – KeyFX enables businesses to hold multiple currencies, reducing the need for constant conversions and unnecessary FX fees.
B. FX Hedging Strategies – KeyFX offers businesses forward contracts that allow SMEs to lock in favorable exchange rates, hedging against fluctuations.
C. Competitive FX Rates – Unlike other banks with hidden fees, KeyFX provides transparent exchange rates, reducing currency conversion costs.
D. Faster International Payments – KeyFX facilitates cross-border payments quickly, eradicating supply chain inefficiencies caused by payment processing complexities.
By implementing these solutions, manufacturing SMEs can safeguard their profit margins, improve cash flow stability, and do business internationally with confidence.
Case Study: A UK SME Expanding into the US & Europe
Company: A UK-based industrial machinery manufacturer.
Challenge: Expanding sales into Germany and the US while sourcing components from China and India.
Key Issues:
- Rising FX costs due to fluctuating GBP/USD and GBP/EUR rates.
- Payment delays affecting supplier relationships.
- High conversion fees eroding profit margins.
How KeyFX Helped:
✅ Opened multi-currency accounts in GBP, EUR, and USD, allowing seamless transactions without frequent conversions.
✅ Implemented FX hedging to lock in stable exchange rates, reducing financial uncertainty.
✅ Optimized international payments, ensuring suppliers were paid quickly and cost-effectively.
Result: The company reduced FX costs by 20%, improved supplier relationships, and expanded into new markets without financial instability.
Traditional Banks vs. KeyFX: A Comparison
| Feature | Traditional Banks | KeyFX |
| FX Conversion Fees | High hidden fees | Transparent pricing |
| Cross-Border Payment Speed | Slow (3-5 days) | Fast (same-day or next-day) |
| Multi-Currency Support | Limited options | Full multi-currency accounts |
| FX Hedging Tools | Not flexible for SMEs | Customizable hedging strategies |
| Customer Support | Standard banking hours | 24/7 dedicated support for SMEs |
KeyFX clearly provides faster, more cost-effective, and transparent solutions compared to traditional banks, making it the preferred choice for manufacturing SMEs operating internationally.
Step-by-Step Guide: How UK SMEs Can Secure International Funding & Manage FX Risks
Step 1: Assess your funding needs – Find out if you need export finance, venture capital, or trade finance.
Step 2: Research FX risks – Identify currency pairs that affect your business (e.g., GBP/USD, GBP/EUR).
Step 3: Open a multi-currency account – Avoid unnecessary conversion fees by transacting in different currencies.
Step 4: Carry out FX hedging – Protect your business from exchange rate volatility with forward contracts.
Step 5: Choose a reliable payment provider – Use KeyFX for secure, fast, and low-cost cross-border transactions.
Step 6: Monitor your financial performance – Regularly review FX expenses and funding effectiveness.
Conclusion: Secure Global Expansion with KeyFX
For UK manufacturing SMEs to expand overseas, access finance, and manage FX risks, the appropriate financial partner is essential. With KeyFX, businesses can optimize their cross-border transactions, reduce FX costs, and drive growth with confidence.
Ready to protect your business from currency risks and maximize international payments? Contact KeyFX today to talk about tailored FX and funding solutions that fit your global ambitions!