Category: Capital Markets & Macro | Published: 28 July 2026 | Author: Daniel Ashworth, Head of Corporate Treasury Advisory, BNP Paribas UK
Corporate treasurers have spent the past few years managing through an unusually wide range of outcomes: an inflation shock, the fastest tightening cycle in decades, an abrupt repricing of credit, and a partial normalisation that has arrived unevenly across currencies and curves. What has emerged is not a return to the pre-2022 world but a genuinely different operating environment β one in which the cost of capital is a live strategic variable rather than a background assumption.
This guide sets out the questions we believe UK treasurers should be pressing on for the remainder of 2026 and into the next planning cycle.
1. The rate environment: normalised, not settled
Policy rates have retreated from their peak, but the structural forces pushing against a return to ultra-low rates remain in place: elevated government financing needs, higher defence and infrastructure spending, the capital intensity of the energy transition, and demographic pressure on labour supply. Planning assumptions built on a decade-long downward drift in funding costs are unlikely to hold.
The practical implications for treasury policy are threefold:
- Hedging horizons should lengthen. Short-dated hedging leaves too much refinancing exposure when the terminal rate is genuinely uncertain.
- Fixed-floating mix deserves fresh scrutiny. A ratio set when floating debt was nearly free may no longer reflect the business's actual sensitivity to rate moves.
- Interest cover covenants need stress-testing. Headroom that looked comfortable at a two per cent base rate can compress rapidly, particularly in leveraged structures.
2. Liquidity: quality over quantity
Committed, undrawn revolving credit remains the cornerstone of corporate liquidity, but treasurers are rightly scrutinising quality as much as headline size. Key questions include the diversity of the bank group, the concentration of maturities, the tightness of financial covenants and material adverse change provisions, and whether pricing grids linked to ratings or sustainability metrics could tighten at exactly the wrong moment.
Diversification of funding sources has proved its worth repeatedly. Corporates with access to bank debt, public bond markets, private placements and asset-backed facilities navigated recent volatility with considerably more optionality than single-channel borrowers. Establishing a capability before it is needed is invariably cheaper than establishing it under pressure.
3. Foreign exchange: the structural question
Sterling volatility has been persistent, and for UK corporates with international revenues or cost bases, FX has moved from a technical treasury matter to a board-level earnings issue. The most useful distinction is between transactional exposure, which is well served by conventional forward hedging, and structural or translation exposure, which requires a more strategic response β natural hedging through cost-base location, currency-matched debt, or a deliberate board decision to accept the volatility.
We continue to encourage treasurers to define hedge objectives explicitly. A programme designed to smooth reported earnings looks quite different from one designed to protect cash covenant headroom, and confusion between the two is a frequent source of unsatisfactory outcomes.
4. Counterparty and operational resilience
Recent years have reminded every treasury function that counterparty risk is not theoretical. Practical priorities include diversifying operating cash across institutions, understanding deposit protection and resolution regimes in each jurisdiction, maintaining tested payment continuity arrangements, and ensuring that treasury management systems and their key personnel are not single points of failure.
Payment fraud deserves particular attention. Social engineering attacks have become markedly more sophisticated, and controls designed for an earlier era β particularly those relying on email confirmation β require review.
5. Working capital as a strategic lever
When capital costs more, the balance sheet becomes a more attractive source of funding than the market. Disciplined attention to inventory turns, debtor days and supplier terms frequently releases more cash, more quickly and more cheaply, than incremental borrowing. Receivables finance, supply chain finance and asset-based facilities allow that release to be accelerated while maintaining supplier relationships.
A practical checklist
- Re-run the funding plan against a higher-for-longer scenario and a renewed-tightening scenario.
- Map every covenant and identify the trigger point under stress.
- Review the fixed-floating mix against actual, current business sensitivity.
- Stagger refinancing maturities to avoid concentration in any single window.
- Confirm that hedge accounting documentation supports the strategy in place.
- Test payment continuity and fraud controls in practice, not on paper.
- Set a working capital target with the same seriousness as an EBITDA target.
Treasury has become a strategic function rather than an administrative one. The organisations that fare best are those whose treasurers are in the room when capital allocation decisions are taken β and who have a banking partner willing to bring markets insight, structuring expertise and honest counsel to the same conversation.