From ensuring employee job security through to governmental loans and assistance, these are certainly tricky waters for UK companies to sail in.
The film and media industry is a sector which has been hit particularly hard. Big ticket Hollywood titles like James Bond’s “No Time to Die” hog the headlines as films are postponed until the end of 2020. The industry as a whole has effectively been mothballed indefinitely putting a large number of jobs at risk.
These are scary times and it is agreed the longer the global lockdown continues, the harder it will be for many businesses to remain in operation. Closer to home, it will be interesting to see how many kitchen sinks the UK government have to throw at this problem if the UK was still in full lockdown after the summer, and potentially beyond. Businesses across all sectors are trying to figure out the implications this is going to have.
The film industry generated over £1.25bln to the UK economy in 2019 which has all but dried up this year. Supply chains, in general, have also been hugely disrupted – the well-documented NHS’s requirement of PPE products a classic example of that. The UK imported over USD 650bln worth of goods in 2019 but that number has taken a massive hit in recent weeks and months*. Until these channels are re-opened fully and the film industry is able to sell tickets to films already produced, as well as get busy making new productions, it’s hard to see much light at the end of the diminishing tunnel.
With that in mind, should production companies really be allocating time and effort assessing their cross-currency international payments during such a stagnant yet tumultuous period?
In fact, now could be an opportune time for production companies to assess requirements and better understand the process to make sure they are best equipped and prepared for when we start to see the resumption of ‘normality’.
Companies filming in multiple jurisdictions have many logistical obstacles to overcome. Financially though, there are also issues to contend with which need addressing from an early planning stage. British filmmakers are not only creating box office draws and winning awards, they are also attracting inward investment from abroad. These funds will often come in as a foreign currency which needs to be converted by the UK-based production company.
Other areas to consider are the skilled workforce of expert crew and staff. From actors and writers to camera crew and assistants, these workers may require payments in foreign currency dependant where they reside. Once you also consider tax credit payments and collection agency payments, there is actually a lot to be considered from a financial perspective.
All of these payments will be affected by movements in the currency market which can drastically impact the cost of the production and that’s where understanding the implications of currency.
There are two key areas to consider:
- Market volatility: Unpredictability and uncertainty can cause major fluctuations in currency volatility and the Coronavirus situation is no different. Sterling depreciated c.13.5% versus the US Dollar over the first two weeks of March. It has subsequently strengthened against the Greenback by 8.5%. Volatility on this magnitude, and over such a short timeframe, makes it very difficult for companies to budget a production. Simple hedging products may reduce their exposure and risk to such currency movements.
- Costs associated with cross-currency transactions: It’s been well-documented that traditional banks, in general, do not pass on the best rates of exchange to corporate clients. By merely checking and comparing historical exchange rates, it’s very easy to uncover potential savings for a company and allow them to re-invest those savings back in to the production.
As we start to see China and some European countries relax their ‘Full Lockdown’ status, it will be interesting to see the implications of that on Coronavirus statistics and in turn, the reaction felt in the financial markets. Everybody is hoping the recovery is sooner rather than later.
No one can confidently predict when or how we will emerge from this pandemic and indeed what the production world will look like once it is over. Consequently, no one can second guess how the currency markets will digest news over the next weeks and months and beyond. So actually now is critical for international production companies to put some time aside and look at a robust FX policy.
Alongside other vitally important issues, international payments can also be the difference between success and failure for a production. Companies who thrive on remaining competitive in a global market need to make sure they are staying ahead of their peers and not eradicating valuable profits in the process due to negative currency movements.
There are alternatives in the FX marketplace right now and choosing a reputable and suitable foreign exchange provider is key.
Film London have partnered with moneycorp to bring their members the right solutions for their international payments. If you wish to book a non-obligatory call to discuss your FX requirements and how they might be able to help, please email FilmLondon@moneycorp.com or phone +44 (0)203 823 0526.
*Source: World’s Top Exports: http://www.worldstopexports.com/united-kingdoms-top-10-imports/