Independent national trade organisation the British Exporters Association (BExA) has completed its 10th annual benchmarking of UK Export Finance (UKEF), the country’s export credit agency. The benchmarking report provides an analysis of UKEF’s activities and reflects upon the range and quality of support over the last 12 months, the last decade, and in comparison to other countries’ export credit agencies.

Titled 100 years underwriting exports, the report coincides with UKEF’s centenary year. It notes that UKEF’s product range has widened considerably over the last decade, but calls for more innovation and improvements.

The report reviews the nine recommendations that BExA put forward to UKEF in 2018 across the categories of whole government support for exporters, export strategy, medium-term products, UKEF accessibility and flexibility, and support for SMEs, analyses the progress of each, and then makes new suggestions based on what growth has been achieved.

An area in which BExA finds there has been “minimal progress” is the UK government’s implementation of the Department for International Trade’s export strategy, which it unveiled last year, and which sets out its ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies.

“Last year’s export strategy laid foundations for a whole government approach to export with a stretching target to make export 35% of GDP. However, the ongoing uncertain Brexit situation seems to have diverted focus from this important initiative,” reads the report.

BExA urges the government to press on with delivering the export strategy and makes a specific recommendation for funding to assist UK exporters in entering new export markets.

Recommendations from BExA with regards to the ECA’s medium-term products include a further increase of UKEF’s direct lending facility (having welcomed the additional £2bn capacity agreed for 2020-22).

“Indications are that this is not enough,” says BExA’s report. “The phasing of this extra capacity comes too late to meet current demand and needs to be accelerated. We also request that extra capacity is permanent rather than temporary.”

The association notes that direct lending is “extremely popular” amongst the exporting community because it offers CIRR fixed interest funding. “This is attractive to overseas customers and provides a level playing field with competitors from the majority of OECD countries. It is essential that direct lending is not curtailed or stymied,” reads the report.

If direct lending capacity is constrained due to other macroeconomic factors then BExA requests that CIRR fixed interest finance is made available by the government on buyer credits and through the export refinancing facility. “BExA understands that UKEF is investigating options to provide CIRR rate lending through alternative sources; this is welcomed by BExA,” it says.

Another medium-term product that BExA identifies as needing refinement is related to environmental and social impact assessment (ESIA) reports.

Current UKEF processes require that ESIA reports – which can cost more than £100k – are completed before credit approval is granted. “This significantly impacts the competitiveness of the UK export, especially in cases where the UK exporter is also the project developer. Some common sense needs to be applied to this process to ensure that the ESIA is completed at an appropriate time in the project lifecycle and doesn’t unduly impact the cashflow of the UK exporter – such as being a prerequisite to the drawdown of funds,” says BExA.


SME exporters need “action”

In terms of support for SME exporters specifically, BExA recommends continued improvement of UKEF’s current products for SMEs and the development of new products to support SMEs in market entry. It notes a particular need to cover tender-to-contract foreign exchange risk, which it says would provide smaller exporters with the comfort of being able to manage the risk of bidding in foreign currency.

Speaking at BExA’s annual lunch in London in early October, BExA co-chair Geoffrey de Mowbray noted that UKEF had supported £6.8bn of exports in the last financial year – more than the previous three years combined. “There is clearly momentum both in larger transactions but also, pleasingly, in smaller transactions,” he said.

UKEF support over the financial year 2018-19 was provided to 181 UK exporters – nearly 80% of which were SMEs. Nevertheless, SME business volumes comprised a mere 1.43% of UKEF’s overall support over that period. In comparison to other ECAs, Export Finance Australia’s SME business volumes over the same period make up 90.15% of its total support, while for K-sure it’s 35%. Meanwhile, for Sweden’s EKN and Denmark’s EKF the figures were 3.87% and 3.86% respectively.

In his speech, de Mowbray called for “action” from UKEF to support small and new exporters to enter new markets by “providing pre-contract support to fund their development, whether that be market entry, bid creation, tender-to-contract FX cover, environmental impact assessments or other direct cost associated with companies growing their exports. In conjunction with this we need UKEF to take a greater level of risk on both our SME exporters but also our overseas buyers,” he said.

In its benchmarking report, BExA also recommends a marketing campaign informing SMEs of options for UKEF export finance support, and the widening of the role of the British Business Bank (BBB) to cover “SME bank market failure”, including for clearing facilities, working capital finance and medium-term finance for small projects, amongst other measures.

Also speaking at the BExA lunch, UKEF CEO Louis Taylor reminded guests that over the last year the agency has announced both its new small deals initiative for SMEs and general export facility. “We’ve quadrupled our support for exports over the decade that BExA has been benchmarking us,” he  said.