The UK government has launched a £5bn export refinancing facility to provide long-term loans to buyers of British products.

The country’s export credit agency, UK Export Finance (UKEF), says it will work closely with banks and exporters over the coming months to agree the detailed mechanics of the facility, which is expected to be operational by the end of 2012.

“In essence, if UKEF agrees to provide an applicant bank with access to the export refinancing facility, the arranging bank will no longer be required to fund the loan until full maturity (which might be, say, 10 or 12 years). Instead, UKEF will undertake to purchase or ‘refinance’ the loan after an agreed period (say, 4 years). The detailed parameters have yet to be decided, however,” a UKEF spokesperson tells GTR.

Chancellor George Osborne announced the measure on July 18, adding that the programme would be designed to ensure minimal risks to the public finances. He expects the facility to be used to support aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, hospital construction and management services, as well as sports infrastructure.

The British Exporters’ Association (BExA) welcomed the measure, stressing the need to address the lack of availability of government support for long-term financing. BExA chairman Jon Coleman says:”‘The introduction of the export refinancing facility represents significant government support in achieving the objectives of the national export challenge, particularly in respect of high value export opportunities. We look forward to working with UK Export Finance and the banks on the detailed operational aspects of the facility.”

The programme is part of a new guarantee scheme meant to accelerate infrastructure projects that may have been delayed due to adverse credit conditions, by using the government’s fiscal credibility.

Up to £40bn-worth of projects could benefit from the initiative, with the first guarantees expected to be awarded in Q3.
A new temporary lending programme has also been made available to kick-start around 30 public-private partnership infrastructure projects, worth an estimated £6bn, in the next 12 months.

Launching the facility, Chief Secretary to the Treasury Danny Alexander said: “The measures we’re announcing today will help work get started on many important infrastructure projects and help our major exporters, providing lasting benefits for thousands of people and a significant boost to the economy.

“This is yet another example of the Coalition working together to put its hard-earned economic credibility to work to increase growth.”