Despite recent tariff rollbacks in the UK, trade tensions and uncertainty persist, making it more critical than ever for funding providers to ensure clients have ready access and operational flexibility.
Automated systems and digitisation that support rapid decision making, real-time information access, and multi-product capabilities will be essential for financial institutions to scale their trade businesses.
Dominic Capolongo, Chief Revenue Officer of LiquidX, explains how digitised trade finance tools may offer UK businesses a lifeline.
Since the US launched some of the most aggressive protectionist trade measures in decades – neatly packaging it under the name “Liberation Day” – trade tensions have remained high. But, in every challenge there is a silver lining, with this particular situation serving not only as a source of disruption, but as a catalyst for change.
For both businesses and financial institutions, the current environment – despite including ongoing trade negotiations and the recent UK/US agreement – underscores the need for greater agility, smarter use of digital tools, and more resilient financial strategies.
The situation continues to change daily – and with that uncertainty comes a clear opportunity to rethink traditional approaches to trade finance. As the sector digitises, it’s enabling faster, more flexible access to capital and offering a way forwards, even as protectionist policies complicate the global picture.
UK sectors facing the brunt
Despite the UK’s relatively favourable treatment, compared to other G7 economies at least, the impact across the board has been swift and clear to see.
As it stands, some of the UK industries most impacted by tariff-related disruption include aerospace, pharmaceuticals, and automotive – the latter of which, despite recent tariff reductions, remains vulnerable due to global supply chain pressures and rising input costs.
While there have been some other positive rollbacks as part of the UK/US trade deal providing some much-needed breathing room – including the 25% steel and aluminum tariff elimination – tensions remain.
Companies are still seeing majorly disrupted supply chains, extended payment terms and increasing pressure on working capital. UK exporters are facing rising costs and reduced transatlantic trade flows, while businesses more broadly are also feeling the indirect effects of global supply chain pressures – particularly as suppliers across the EU, China, and the US raise prices to offset tariffs elsewhere. As payment cycles extend and uncertainty increases, businesses find themselves with compressed working capital and greater exposure to cross-border risks.
In response to these challenges, UK businesses are turning to trade finance and risk mitigation tools to maintain liquidity and manage exposure.
Trade finance’s role in helping companies weather the disruption
Rather than breaking under tariff increases, trade finance has adapted. And because of that, it’s poised for significant growth over the next five years in most parts of the world.
Put simply, trade finance tools help businesses access cash more quickly and operate with greater flexibility; both essential when companies are facing rising costs, longer payment cycles and disrupted supply chains. These tools help to:
- Stabilise cash flow by unlocking liquidity from unpaid invoices or extended payment terms.
- Reduce payment risk by enabling more transparency and control across counterparties.
- Adapt to supply chains more efficiently in response to shifting tariffs or sourcing challenges.
Looking closer, some of the specific digital trade finance tools and systems helping companies navigate volatility right now include:
- Payables finance programmes: Allows buyers to extend payment terms while allowing suppliers to receive early payments, which enhances working capital for both parties in the transaction. This is particularly valuable as businesses face tariff-related delays and renegotiate contracts.
- Receivables finance programmes: Lets businesses convert outstanding invoices into immediate cash, offering greater financial flexibility to navigate volatile markets.
- Advanced digital platforms providing real-time position visibility: This allows banks and asset managers to track counterparty exposure, monitor credit limit utilisation, and anticipate scheduled payments, which are all critical capabilities when navigating disrupted supply chains.
- Automated reconciliation systems: Can address the heightened complexity of cross-border transactions in an environment of shifting tariffs. These systems can process payments across multiple jurisdictions while maintaining visibility throughout the transaction lifecycle, thereby reducing operational risk at a time when margins for error are increasingly thin.
It’s also key to note that the digitisation of these trade finance processes further enhances their effectiveness. By streamlining traditionally paper-based processes, businesses can access working capital solutions more rapidly and efficiently.
Looking ahead
Right now, financial institutions have a strategic opportunity to provide much-needed liquidity and flexibility as businesses pivot their operations, renegotiate contracts, and explore new markets in the face of rising protectionism.
Banks and service providers that can deliver end-to-end digital trade finance – spanning SCF, receivables funding and working capital optimisation – will emerge as crucial partners. Only then can these institutions help businesses not only manage immediate cash-flow disruptions, but also mitigate payment and delivery risks across increasingly complex supply chains.
