Trade finance and insurance products offered by the UK government are set to be improved. As part of an overall strategy to use trade to drive recovery in the UK economy, the coalition government has announced four new schemes, with a particular emphasis on supporting SMEs and increasing exports to the emerging markets.
Speaking at the launch, business secretary Vince Cable said: “Aligning ourselves with rapid growth, particularly in the emerging markets, is absolutely critical to getting growth going in the UK.”
He added that the government needs to find ways of getting more small and medium-sized businesses (SMEs) involved in international trade. Far fewer UK SMEs are exporting internationally compared to their competitors such as Germany.
“SMEs are not properly integrated into trade,” Cable asserted.
The new trade and investment minister, and former HSBC head, Lord Stephan Green, commented: “I do see trade and investment as crucial to any meaningful or sustainable growth strategy for this country.”
“Clearly we are not going to grow on the basis of consumption fuelled by debt,” he added.
The white paper was only the start of the government’s implementation of its new trade strategy, with Lord Green noting at the launch he is to chair a new cabinet committee that will work on providing a “detailed action plan” that will ensure the strategy is translated into policy.
Central to the plans is the expansion of the UK export credit agency ECGD’s existing short-term export insurance to cover a broader range of exporters, including SMEs.
The new Export Enterprise Finance Guarantee (Export EFG) has been set up by the department for business, innovation and skills, and will offer export finance of up to £1mn to SMEs.
For all those not eligible for the Export EFG, ECGD has set up an Export Working Capital Scheme that offers over £1mn.
The other two newly-established schemes include ECGD’s bond support scheme, under which the government shares risks with lending banks on the issue of contract bonds. The UK export credit agency will also be offering foreign exchange hedging contracts to SMEs by sharing credit risk.
The announcement of the white paper is only the start of the government’s strategy to prioritise trade, but the new schemes have already been welcomed by the trade finance market.
Mike Holley, CEO of Equinox Global, a newly-established player in the trade credit insurance market comments: “Exporters have not been served well by the trade credit insurers in the crisis – commercial insurers have withdrawn capacity, making trade difficult – at a time when trade should be encouraged.
“The enhanced scope of the ECGD, together with the arrival of a number of private insurers providing new, transparent and more certain capacity, will be welcomed by the UK’s exporters and be a boon to the economy.”
The Forum of Private Business is also pleased with the direction the government is taking. Chief executive Phil Orford comments: “A lot of these measures are very welcome and reflect precisely what we have been lobbying the government for in recent months.
“They will mean that the UK government is a step closer to other European nations in terms of the support it gives to SME exporters.
“The ‘export EFG proposal’ is particularly welcome and should, if implemented properly, be hugely helpful to SMEs which have been prevented from accessing the funding required to exploit foreign markets.
Improving state support for exporters is just one element of a white paper published by the government which explains how trade and investment will form a key part of the growth strategy for the UK.
The government is also planning on improving UK Trade & Investment’s focus on emerging markets and on increasing the lobbying of European partners to “radically improve” the regulatory environment in the single market for SMEs.
The White Paper highlights the UK government’s dedication to finalising the Doha round of trade negotiations. After stalling on numerous times, the government is optimistic a conclusion to the talks can be reached this year, and in doing so deliver a £110bn boost to the global economy.
Negotiating a variety of EU Free Trade Agreements with trading partners including India, Canada, Singapore, the South American countries of Argentina, Brazil, Paraguay and Uruguay, and hopefully Japan, is also on the UK government’s agenda.
Development and ensuring that the poorest in the world are looked after is a central theme of the government’s trade strategy.
The white paper proposes that Least Developed Countries (LDCs) should be granted greater market access to ensure their successful economy development.