BCC report blasts lack of government support for UK exports

A British Chambers of Commerce (BCC) report has found that the trade gap between the UK and the EU extended to £3.5bn (US$5.1bn) at the end of last year, sparking a recommendation from the BCC for the UK government to provide more and easier acquirable trade financing for SMEs.

The report, titled ‘Exporting Britain: Trade Finance’, also highlights that one in eight UK businesses that used trade finance over the last 12 months had trouble securing it, and of the firms that had faced problems, nearly half claimed to have lost business to exporters from countries with state-backed trade finance schemes.

The BCC labels the government’s measures to address the problem as inadequate, particularly the steps taken to bolster domestic export credit insurance and the underutilised letters of credit (LC) guarantee scheme which aimed to boost letters of credit numbers through banks and the UK’s ECA sharing the credit risk for confirmed LCs in certain emerging markets.

Steve Roberts-Mee, spokesman for the Export Credits Guarantee Department (ECGD), the UK’s ECA, says: “I think that the report is quite fair, it accepts what we have done and puts it in the historical context of the recession. While we have not helped a great deal of companies, the exporters who did use our scheme found it invaluable.”

Furthermore, 43% of exporters surveyed did not use any form of trade finance at all, which increases the risk for smaller companies who are less able to cover the impact of a customer defaulting.

This also hampers trading with emerging markets, as firms do not have the necessary cover if things go wrong.

However, the report is only concerned with exports and this does not give the entire picture of what is being done to help UK SMEs, as Roberts-Mee comments: “The problem is that the report only looks at exports. We did a lot to help solve domestic supply chain problems because there is no point in a business having lots of orders if it can’t get the parts needed to complete them.”

According to the report, onus does not only lie with government institutions, as John Lucas, trade policy advisor at the BCC and author of the report, says: “We would like to see a state-backed scheme for exporter trade credit insurance. However, there is also an element of export credit insurers needing to be more realistic about prices, furthermore, SMEs need to be given more information on ways that they can deal with this.”