After a year of intense Sterling volatility that caused losses for nearly half of UK firms, 78% of corporates are now actively hedging their FX exposure. This proactive shift is driving a dramatic rise in hedge costs and accelerating the adoption of AI and automation to bring speed and discipline to the treasury function.
The days of leaving Foreign Exchange (FX) exposure to chance appear to be fading fast for UK corporates. A new report, The MillTech UK Corporate CFO FX Report 2025, reveals a significant shift in treasury strategy, driven by the kind of sterling volatility that can swiftly erode a balance sheet.
The headline finding? A striking 78% of UK corporates now hedge their FX risk. This surge is a direct response to a year where nearly half of businesses (48%) reported suffering losses due to the pound’s sharp swings. After hitting a four-year high against the dollar in early summer, the pound experienced its weakest monthly performance in three years, showcasing the unpredictable nature of global trade and geopolitical uncertainty.
For CFOs navigating this terrain, the response is proactive and strategic, moving hedging from a “nice to have” to a “fundamental part of managing currency exposure,” as noted by Eric Huttman, CEO of MillTech.
Here’s how UK finance leaders are strengthening their FX defenses:
Extending Hedge Lengths: Over half of finance leaders (55%) are now extending the duration of their hedges. While hedge lengths averaged 5.52 months in 2025, consistent with the previous year, this remains significantly higher than the 4.04 months recorded in 2023.
Increasing Hedge Ratios: About 37% of firms are increasing the portion of their exposure they cover. The mean hedge ratio has grown substantially to 53%, up from 45% in 2024, indicating a move to protect greater portions of risk.
The Unhedged are Considering a Move: Even among firms that are not currently hedging, a substantial 68% are now considering doing so.
This increased protection, however, comes at a price. The report highlights that the average cost of hedging climbed by a notable 66% in 2025, with 92% of corporates reporting an overall increase in costs.
Beyond hedging, the research illuminates where CFOs are directing their focus in the back office and on the geopolitical front.
While strategic hedging is up, the underlying operational workflow remains heavily manual. Email is now the second most common FX execution method (42%), a ten-point jump from 2024, followed closely by the phone (40%). This reliance on manual processes is prompting a strong appetite for change:
Automation as Priority: Automation is the second highest priority for UK corporates.
Key Targets for Automation: Key processes being targeted include reporting (36%), trade execution (35%), and the full end-to-end FX workflow (33%).
Artificial Intelligence (AI) adoption is accelerating as a key enabler for this shift. For UK corporates, AI is being positioned for core financial functions:
Process Automation: 42% see AI application here.
Risk Identification: Also at 42%.
Risk Management: 41% are applying AI in this area.
In 2026, the firms that embrace these smarter, more automated FX operations will be “better placed to act quickly, improve accuracy and protect themselves in an increasingly unpredictable market,” according to Huttman.
Geopolitical factors continue to influence strategy, as 48% of UK firms reported a negative impact from trade tensions and tariffs. However, UK sentiment is notably optimistic about the future impact of Trump-era tariffs, with 84% of corporates feeling positive about the next 12 months.
Finally, the greatest operational challenge remains the Expertise Gap. Limited internal expertise is the biggest hurdle for firms in their FX operations (29%), ahead of securing credit lines and cost calculation. This skills gap makes outsourcing crucial, with the top motivations being to gain access to specialized expertise (34%) and enhanced efficiency/automation (34%).
The findings from the MillTech UK Corporate CFO FX Report 2025 underscore a clear narrative: the era of reactive FX management is over. UK CFOs are taking a disciplined, strategic approach to hedging to neutralize volatility, while simultaneously recognizing the urgent need to ditch manual processes in favor of smart, automated solutions.