International Payments Industry Faces Structural Shifts say Kantox Following Brexit Vote

Kantox Rami

Kantox, the international payments and FX hedging specialists have warned shifts in the industry's regulatory environment and the struggle to source talent could see them having to dilute the importance of their London office.

  • 2 - 3 more years of foreign exchange volatility lie ahead
  • Confirm unhedged importers have been burnt by Brexit vote
  • May have to relocate some operations to guarantee exposure to EU market
  • Concern over ability to attract the best talent over coming years

Kantox helps import/export companies to hedge against the exchange risk of buying/selling goods in multiple currencies.

The company works with customers in 32 different countries who have exposure in the UK and internationally.

After urging their customers to come up with a contingency plan around the EU referendum, Kantox are now busy planning their own.

Antonio Rami, the Co-founder and COO, told that he is looking to expand the business within Europe in order to keep keep a foot in the important European market.

At present, Kantox are authorised by the FCA, allowing their services to be passported into other countries in the European Union.

Unhedged Clients Hit by FX Volatility

Kantox saw an increase of concern amongst clients before the EU referendum on how a Brexit vote would impact their supply chain.

“What we have found is those that planned in the short term, the next 12-18 months are managing quite well, however the question is for the long term,” says Rami.

Rami says those customers who didn’t have a policy in place against a currency fall after the referendum are seeing their imports from the EU being reduced.

Some are seeing reduced profitability as the cost of their imported inputs increase.

“For some of our clients the impact has been huge. We keep an ethical, fair-price policy but many customers I think felt that it was going to remain so they decided to be very exposed for that. It didn’t go well,” says Rami.

It doesn't matter if there is a Brexit or not in terms of currency exposure, business have to be prepared and cannot let FX hedging pass.

Rami thinks it is very important to highlight that if business are not prepare they will ultimately take a very big hit.

Indeed, Kantox expect a further 2-3 years of foreign exchange volatility.

EU Vote Could See Need to Move Some Operations

Rami was not happy with the result of the EU referendum and he now anticipates regulatory change for his industry.

While there are no plans to leave their UK-based office they cannot afford to compromise their EU business, “so we need to look at regulators in Europe and then plan to passport our services in the EU.”

“Of course this would mean that the weight of our UK operations would be diluted if we have another base - less money would be going to the UK than before,” says Rami.

Unless there is an agreement that you can passport financial services like today, nothing changes.

“It depends on the negotiations, we need to think worst case scenario,” says Rami.

Kantox’s plans to expand have therefore emerged from the referendum.

They don’t plan to leave the UK but say the importance of the office would get diluted.

Talent Acquisition Headache Could Get Worse

Over recent years the UK government has struggled to keep a lid on explosive immigration rates.

The immigration they can control is that from outside of the EU; and we have seen the imposition of a points-based system to try and let highly-skilled labour come through, while restricting inflows of low-skilled labour.

While immigration from outside of the EU is still greater than immigration from within the EU, there is still the sense amongst financial services firms that people with the right skills are not being let through.

For Kantox the worry is that this ‘mix up’ could impact the acquisition of EU talent.

The company employs almost 100 people from 30 different nationalities across both offices.

“The limitation of bringing people in from outside the EU is a big problem, if this goes to within EU it becomes a bigger problem as it effects your talent pool,” says Rami.

Rami’s advice to Theresa May and her government is that they be, “very, very careful on the negotiations, play it very smart so the EU does not feel like we want to take advantage of them.”

Ideally Kantox would like all the good things without the complications but Rami worries the EU wants to make an example of the UK and show the world the country made a wrong decision.

“Negotiations are going to be key,” says Rami.