MillTech’s Q4 2025 Corporate Hedging Monitor includes findings from a survey of 250 senior finance decision-makers at UK and US corporates and reveals that four in five firms (80%) reported losses from unhedged risk in 2025, with nearly a fifth (19%) describing these as significant.

Against this backdrop, corporate hedging activity rebounded from Q3 lows, signalling a renewed focus on risk reduction. The average hedge ratio rose from 46% to 49%, although it remains below levels seen before Q3 2025.

Hedge tenors also lengthened, increasing from an average of 5.8 to 6.3 months, in line with levels recorded in the first half of 2025. In the UK, average hedge lengths marginally exceeded those of Q4 2024, highlighting a renewed willingness among corporates to lock in protection for longer and improve cash flow certainty.

Central bank policy and inflation rates emerged as the most influential external factors shaping FX hedging decisions, each cited by 17% of corporates. Notably, this was the first time inflation rates ranked joint top, while central bank policy has consistently led the list since Q2 2025.

Looking ahead, tariff-driven market uncertainty is prompting a more defensive outlook. Nearly two-thirds of corporates plan to increase hedge ratios (64%) and extend hedge tenors (59%), with UK firms more inclined to do so than their US counterparts. Only a small minority expect to reduce coverage, with 10% planning to lower hedge ratios and 9% hedge lengths.

Eric Huttman, CEO of MillTech, commented: “Q4 2025 marked a clear shift back towards defensive FX management. While hedge ratios and tenors increased, they have not yet returned to early-2025 levels, suggesting firms continue to balance protection against cost and flexibility. However, with most corporates experiencing losses from unhedged exposure, 2026 is likely to see further increases in coverage as tariff and policy-driven uncertainty persists and major currencies recorded their largest swings in nearly a year.”