Currency risk isn’t abstract when your mission bills are in euros and your budget arrives in pounds. The UK Space Agency asked the Government Actuary’s Department to map that exposure and test how hedging could stabilise payments to the European Space Agency. The brief was straightforward: protect public funds while keeping the UK’s space programme on track.

UKSA receives funding in sterling from the Department for Science, Innovation and Technology but settles regular contributions to ESA in euros. That mismatch leaves the agency exposed to movements in the sterling–euro rate between budget setting and the day the invoice is paid. Without a plan, the exchange rate can quietly turn a balanced programme into an unplanned overspend.

GAD analysed historic GBP/EUR moves and ran scenario tests to show how different exchange‑rate paths would affect upcoming euro obligations. The work compared a simple ‘pay spot when due’ approach with hedging policies that lock in rates in advance, helping officials judge the trade‑off between certainty and potential upside.

Think of a €100 million payment. If sterling weakens by 5% before settlement, the sterling cost rises by roughly £4–5 million versus today’s rate. That is the kind of volatility that can disrupt multi‑year planning and require difficult reprioritisation elsewhere.

Several strategies sit on the table. Buying forwards in tranches spreads timing risk and avoids guessing the perfect moment. Maintaining a rolling hedge ratio-say 50–80% of forecast euro needs-smooths costs across the year. Some agencies use options for flexibility, accepting a premium to cap the worst outcomes while retaining participation if sterling strengthens.

The point is policy, not speculation. A documented hedge framework sets who decides, when to execute, the counterparty controls and how results are reported. Done well, hedging converts an uncertain exchange rate into a budgeted price, freeing programme teams to focus on delivery rather than currency markets.

Government bodies are no strangers to overseas currencies, from defence procurement to development payments. The GAD analysis gives UKSA a common evidence base to choose when to buy euros, how much to hedge and how to phase purchases around DSIT funding cycles, reducing mid‑year surprises.

Investment consultant Timea Varga at GAD said the work “applied actuarial techniques to clarify financial risks”, drawing on investment‑management experience to inform policy and deliver value.

For taxpayers, the benefit is simple: pay what was budgeted. By locking in a rate or capping the downside, UKSA can insulate ESA contributions from abrupt currency moves and avoid tapping contingency pots to cover FX.

There’s a wider lesson for finance teams outside government too. Whenever revenues and costs land in different currencies-think UK manufacturers paying euro‑area suppliers-the disciplined approach is to forecast exposures, set a hedge ratio and review it regularly, rather than trying to time the market.