Corporate Hedge Ratios Rise: Survey

UK and US corporates have raised both hedge ratios and average hedge tenors in the first quarter of 2025, likely leading to a reduction in FX-related losses to businesses, but seem to be approaching market volatility differently.

The Q1 2026 Corporate Hedging Monitor from MillTech finds that the average hedge ratio across those firms surveyed rose to 57%, up from 49% in the Q4 2025 survey. While MillTech says this is the highest since it started tracking this measure in Q1 2024, the same level was hit in Q2 2025. The number of firms hedging 1-50% of their exposures dropped in Q1, while it grew in 51-75% and 76-100%.

The average hedge ratio was higher amongst UK corporates at 58%, while their US peers hedged an average of 56%. UK corporates hedging 51-75% rise was the highest mark established in the report, with 61% of respondents hedging there, compared to just 48% in the US – which was also the “busiest bucket”.

The average hedge length also rose notably, to 6.62 months from 6.33 months – this is the longest since Q3 2024. UK firms went longer than US, with the average hedge length in the former almost seven months, while in the US it was 6.23 months, which was only fractionally higher than Q4 2025.

US firms also seem to be reacting tactically to the current upheaval, it is notable that while those hedging in the 7-9 months tenor rose to 33% from 30% (and in 10-12 months by one point to 12%), the biggest rise was in 1-3 months, where 16% of respondents said they were hedging, up from 12% in Q4. In the UK section of the report, however, the percentage of corporates hedging at the shorter end declined from 9% to 5%, while in 7-9 months it rose six points to 52% and in 10-12 months by three points to 9%.

While there were not major changes in the biggest external factors affecting hedging decisions, there was once again a divergence either side of the Atlantic. US corporates seem to care less about geo-politics, with the percentage citing this as the biggest factor falling to 8% from 13%, while in the UK, it was unchanged at 13%. UK corporates (20% from 11%) are also more concerned about credit availability – it was single largest factor cited – while in the US, those concerned about this dropped to 15% from 17%.

Somewhat paradoxically, the report finds that US corporate concerns over volatility has risen notably, from 12% to 16%, while in the UK, it halved to 11% from 22%. Given how geopolitics is driving so much of market activity, it would be interesting to get deeper insight into the US findings in particular.

The biggest concern for US corporates, albeit only at 19% (from 16%) was “time/resources”, and again there was a disconnect, for UK corporates citing this fell to 9% from 15%. Equally, US corporates seem sanguine on central bank policy, with14% citing this as a big factor (from 20%), while in the UK, this rose to 18% from 14%.

On both side of the Atlantic, corporates were concerned about the cost of hedging (hint: it comes from the geo-politically-driven volatility we are experiencing), this factor was cited by 12% in both nations, up from 6% in the previous survey.

The research also shows that average losses from unhedged FX exposures dropped by half to GBP 1 million in Q1 – across 2025 the quarterly average was over GBP 2 million. While 54% of UK firms saw losses between GBP 500,000 and 999,000, compared to 44% of US respondents, 17% of US firms saw losses above GBP 1 million, compared to14% of UK firms.

“Q1 2026 showed that firms are doubling down on defensive FX risk management strategies as they steer through even greater uncertainty,” observes Eric Huttman, CEO of MillTech. “It was a challenging quarter, but businesses prepared themselves well, hedging their exposures to protect capital and boost their businesses’ stability.

“Our report illustrates just how rewarding strong FX hedging strategies can be during times of intense volatility, underscoring the financial impact of FX risk management,” he adds. “That said, losses of nearly £1 million per firm from unhedged FX risk show that currency volatility remains a multi-billion-pound problem on both sides of the Atlantic.”