Despite a host of industry associations and government agencies pointing out the difficulties SMEs face when exporting, including access to finance, the response has been piecemeal.
SMEs exported £107.9bn-worth of goods in 2023, accounting for just over a quarter of UK exports, the government says. Firms that export grow faster, are more productive and pay higher wages than companies with a sole domestic focus, according to the government’s small business plan published on July 31.
Encouraging more small businesses to engage in international trade could also help boost the UK’s flagging exports. The value of the country’s goods exports has fallen for the last two years, driven by a steep decline in exports to the EU following Brexit.
“We desperately need to be exporting more,” said Tim Cook, chief executive of engineering company Reidsteel, at GTR UK in June.
But according to the Federation of Small Businesses, many SMEs “are not aware of how they could benefit” from government support, “or find existing offerings difficult to navigate”.
What are some of the solutions that are currently being developed, or proposed?
UKEF insurance cover tweak
Earlier this year, UK Export Finance (UKEF), the UK’s export credit agency, announced a product aimed squarely at SMEs.
Under the scheme, an exporter applying for multiple contract credit insurance with a credit limit under £25,000 can automatically become eligible to incrementally increase that limit to £100,000 by building up a “positive trading history” with individual buyers.
Exporters do not have to make an application to increase the credit limit. Instead, UKEF will do so automatically once buyers consistently pay invoices within 30 days of the due date, and other conditions are met.
This approach reduces the paperwork burden that can dissuade small businesses from accessing UKEF support. UKEF has received four applications for multiple contract export insurance policies with a sub-£25,000 limit in the weeks since the product was announced, a spokesperson says.
Revitalising the General Export Facility
Earlier this year, the dilemma of how to finance exporting SMEs was underlined by the exit of former non-bank lender Newable from UKEF’s flagship scheme for small and medium firms, the General Export Facility (GEF).
Newable’s departure was a blow because it specialised in providing small-ticket facilities to SMEs, which are difficult for banks to turn a profit on. UKEF says it is now seeking to entice new non-bank lenders to the programme.
“We’re currently in active discussions with non-bank financial institutions for onboarding over the coming months,” a spokesperson for the agency tells GTR.
UKEF’s latest annual report says GEF is its “most popular product” and the scheme provided £771mn in working capital across 632 transactions in the 2024-25 financial year.
The agency says it has received at least 49 claims under the GEF scheme, but it expects the number of lenders calling on UKEF guarantees for non-performing GEF loans to “increase substantially over the next few years within accepted risk parameters”.
“The combination of increased business and onboarding new NBFI [non-bank financial institution] partners in a challenging economic climate will, we think, lead to an uptick in claims in the trade finance sector,” it says in the annual report.
UKEF direct lending
Geoffrey de Mowbray, chairman of the British Exporters Association, argues that UKEF needs to lend directly to SMEs. Currently, UKEF’s direct lending facility is aimed only at overseas buyers of UK exports.
He says a model similar to Sweden’s – which combines guarantees from the export credit agency with funds from an export finance institution – would allow UKEF “to step in at early stages where private lenders may be hesitant”.
“In the UK, we lack that level of public sector flexibility,” de Mowbray tells GTR. “A limited-scale direct lending pilot – from HM Treasury, perhaps via British International Investment or UKEF – could prove new models and de-risk deals for future private sector participation.”
“This kind of proof-of-concept lending is particularly valuable in frontier or lower-mid cap markets where track records don’t yet exist.”
Capital requirements rethink
Last year, the Bank of England withdrew proposals to hike capital requirements on some trade finance products as part of its implementation of the global Basel 3.1 framework. The plans would have made some trade finance lending, such as through letters of credit and guarantees, more expensive for banks.
But last month, Chris Southworth, secretary general of the International Chamber of Commerce UK (ICC UK), called on regulators to re-examine the capital burden on trade finance.
“It is high time trade finance was categorised as its own, low risk, asset class with a more proportionate, lighter touch regulatory regime,” he wrote to the head of the Financial Conduct Authority. He said the Basel framework came “at the cost to SME trade and wider economic growth”, adding: “there has never been any compelling evidence for treating low risk trade finance in the same way as higher risk forms of finance”.
Proposed KYC utility
Alongside higher capital burdens, the growing cost of financial crime checks – known as know-your-customer (KYC) requirements – that lenders must conduct on new clients is also cited as having a big impact on margins for SME lending.
Last month, the ICC UK published a proposal for a project that it said would streamline banks’ ability to conduct those checks by creating a so-called KYC utility. It would allow banks to share basic information they have on clients, including SMEs, and potentially remove the need for each bank to fully screen every new application.
“A unified KYC utility, underpinned by trusted public infrastructure and interoperable identifiers, would not only reduce costs and delays in compliance but also fuel SME growth, regulatory confidence and the UK’s leadership in digital trade,” the ICC UK says in the proposal. It calls on the government and Financial Conduct Authority to launch a pilot.
Such a utility would not include overseas companies that may be buying from a UK exporter.
A psychological shift
A less tangible but critical element in boosting SMEs’ export capacity is what was described at a GTR UK panel on the topic as a psychological shift – both for how SMEs view international trade and in overcoming financial hurdles.
“What we see with some clients is they get bogged down in too much information, and actually it’s an overload,” said Victoria Boldison, founder of Bolst Global, which advises food and drink exporters. “The resource is there, but you need to know where to look.”
Part of the UK government’s small business plan, released late last month, involves bringing together some of the disparate guidance and information on international trade through a new business growth service it says will make finding information and support easier.
On access to finance, BExA’s de Mowbray says “it’s a coordination issue”.
“What we need is for ECAs, banks, exporters, consultants, lawyers and intermediaries to speak a common language and align processes. One of BExA’s key aims is to bring all this together under a unified, streamlined approach.”
“While awareness of export finance and UKEF support has improved, psychological hurdles remain – especially around perceived speed, complexity and accessibility. Many SMEs still believe it’s too slow or bureaucratic, and unfortunately, in some cases, they’re not wrong.”
