As unhedged FX losses reach an average of £6.71m for UK corporates and $9.85m for US firms, the latest MillTech Corporate Hedging Monitor indicates a decisive shift toward defensive risk management. With tariff uncertainty looming, nearly two-thirds of finance leaders plan to increase hedge ratios and tenors in 2026 to protect their bottom lines
The era of FX complacency has met a multi-million-pound reality check. As central bank policy divergence and inflation concerns return to the top of the treasury agenda, a new report reveals the stark financial toll of unmanaged currency risk.
According to MillTech’s Q4 2025 Corporate Hedging Monitor, which surveyed 250 senior finance leaders across the UK and US, a staggering 80% of firms suffered losses due to unhedged foreign exchange exposure in 2025. These were not merely rounding errors; average losses reached £6.71m for UK corporates and $9.85m for their US counterparts.
The Q4 data signals a decisive shift away from the hedging lows seen in the third quarter of 2025. Treasurers are no longer waiting for volatility to subside; they are actively locking in protection.
Hedge Ratios: The average ratio climbed to 49% in Q4, up from 46% in Q3.
Hedge Tenors: Protection lengths have extended from an average of 5.8 months to 6.33 months.
UK Resilience: UK firms are leading the charge in duration, with hedge lengths now marginally exceeding the levels recorded in Q4 2024.
For the first time since the monitor’s inception, inflation rates (17%) have joined central bank policy (17%) as the primary external drivers of hedging decisions. While US treasurers remain laser-focused on Federal Reserve manoeuvres and credit availability, their UK colleagues are increasingly preoccupied with local volatility, cited by 22% of UK respondents as their biggest concern.
The outlook for the remainder of 2026 is defined by “defensive” positioning. The looming specter of tariff-driven market uncertainty is forcing a strategic rethink of currency buckets.
The report finds that nearly two-thirds of corporates (64%) plan to increase their hedge ratios this year, while 59% intend to extend their hedge lengths. This proactive stance suggests that finance leaders are prioritising cash flow certainty over the potential (but increasingly risky) gains of staying unhedged.
Eric Huttman, CEO of MillTech, notes that while activity is rebounding, it has yet to reach the peaks of early 2025. “Q4 2025 marked a clear shift back towards defensive FX management,” Huttman observed. “With most corporates experiencing losses from unhedged exposure, 2026 is likely to see further increases in coverage as tariff and policy-driven uncertainty persists.”
For the modern treasurer, the message from Q4 is that in an environment where major currencies are recording their largest swings in nearly a year, the cost of protection is significantly lower than the price of exposure.