We examine the sensitivity of 31 UK non‐financial industries to exchange and interest rate exposure from 1990 to 2006 using first‐order autoregressive exponential GARCH‐in‐mean (EGARCH‐M) model. We find that the stock returns of UK industries are more affected by long‐term interest rate risk than exchange rate risk and short‐term interest rate risk. Moreover, the euro introduction decreases exchange and interest rate exposure and competitive industries exhibit higher returns volatility than concentrated industries. Furthermore, for most UK industries: increased risk does not necessarily lead to an increase in returns and persistence of volatility is much higher in some industries than others.