Foreign currency transactions can be a minefield for any small business and the difficulties involved in making or receiving payments discourage many companies from trading in overseas markets.
"It seemed clear to us that companies, particularly small businesses, were getting a raw deal from the banks in terms of exchange rates, poor service and transactions getting lost," says Helen Scott, managing director of 4X Currency Exchange.
The business was originally envisaged as an offshoot of Eurocash, a large VAT recovery company owned by Redman and based in Brighton. The operation specialises in clawing back VAT paid by companies attending trade fairs or operating in Europe.
The ‘Eureka' moment came when Scott and her chairman Martin Redman realised the potential for an electronic system - trading at live prices - that allowed businesses to carry out all their foreign currency transactions online.
"There was nothing available off the peg, so we decide to develop our own software," Scott explains, arguing that the beauty of the system is its simplicity: what you see is exactly what you get. "Live feeds from currency markets around the world mean that the customer gets a fully transparent rate. As the transaction takes place immediately, there are no delays and therefore no fluctuations in exchange rates. Businesses can also forward-trade, buying currency at today's rates without paying in full until the transaction is ready to go through, say, in three or six months' time."
Growth spurt
While Eurocash provided the inspiration, 4X Currency Exchange has been trading as a standalone business since 2004. It has seen strong growth in that time but Scott sees the opening of the Leeds office as the start of a new era in the company's development. "Right now we are looking for investment to fund further growth. While transactions will continue to be processed through the back office in Brighton, Leeds will be our front office, with a fully staffed sales and marketing team."
Transactions valued at over £200m are projected for the next 12 months. "Average trades are in the region of £20,000 to £30,000 and our core market is made up of businesses with overseas trading requirements, whether it's an importer who has to make payments to foreign suppliers or an exporter receiving payment in foreign currency," says Scott.
A small margin is made from each trade but the software that allows businesses to trade online is free and there are no transaction fees. With savings of between £400 and £1,000 on a £50,000 trade, word has also got round among overseas property buyers. "While it's not our main market we're more than happy to service it," adds Scott.
Apathy among the corporates has proved more difficult to overcome. "There is no doubt that we offer better value but the business market has been slow to respond to the opportunity," says Scott, quoting surveys that show more than 50% of businesses experience transaction problems when making or receiving foreign currency payments. The main frustrations are the time taken for funds to be received and cleared, and time spent investigating missing payments.
Reputation, brand-building and a strong balance sheet will also be crucial to the success of the business going forward. "For a financial manager or controller in a large corporate maybe there's no incentive to change the way they do business but it's a different matter for owner/managers or small firms, when it's their money that's involved."
Regulation of currency markets by the Financial Services Authority from next year is expected to force through greater transparency and confidence. "Customers will be able to see exactly what they are paying for and will be able to make their own minds up," she says. "Of course, in the current economic climate, one of the main things people are looking for is confidence and FSA regulation will give customers much greater assurance."
Heading north
But if everything happens online and the IT is still down south, why expand the business to Leeds? "We looked at a London office but we felt that we simply wouldn't get noticed there," says Scott. "As the UK's second largest centre for financial and business services, Leeds offers us the ideal base to grow the business from. It's geographically well located and with many of the region's manufacturers operating in global markets there's a great opportunity for us to develop the business in that sector."
Scott, who swapped life in Leeds for a place at Nottingham University in the early 1980s, doesn't deny that pride of place has played an important part in the decision to locate the business in Leeds. "It's my home town and I still have family here. I believe in the city and have watched Leeds reinvent itself over the last 20 years."
She therefore sees the North-South divide as being as much about a gap in perception as it is about prosperity. "Leeds stands up to any other UK city in terms of the professionalism of its financial services sector and it has a growing reputation as a modern centre for business and finance," she says. "Colleagues still took a lot of convincing but visiting the city and seeing it for themselves has convinced them that locating the business here was the right decision."
Scott expects plans for a new Leeds arena to have a massive impact on how the city is perceived externally. SMG Europe - one of the leading arena operators - was appointed earlier this year to run the proposed 13,000-seat arena, which will bring major concerts, conferences and exhibitions, along with thousands of visitors, to the city.
Negotiations are currently underway to appoint a developer and the arena is expected to be built on a site close to the city centre and motorway access points. From the city's point of view it is essential that the arena stacks up as a commercial proposition and as a revenue earner for Leeds. But given the potential to attract major national and international conferences as well as headline concert performers, it will also undoubtedly play a role in bringing people into Leeds and in raising the city's profile outside the region.
For Scott, that's the secret to sharing the city's success more widely. "There's no substitute for direct experience in changing people's perceptions and the arena will undoubtedly play a major part in this. You can write about how great Leeds is but it's only when you get people coming to the city that the scales really fall away from their eyes."
David Baggaley is marketing manager within Leeds City Council's business and enterprise team
