UK Export Finance (UKEF) has launched a new product to guarantee payments made by overseas buyers of UK goods.
The bills and notes guarantee, announced today by minister for exports Andrew Bowie at the export credit agency’s annual finance forum, covers payments due under bills of exchange or promissory notes received by UK companies for capital goods, services or intangibles supplied to an overseas buyer, and purchased by a financial institution. UKEF says the product is aimed at contracts between £500,000 and £30mn.
Per the OECD Arrangement on Officially Supported Export Credits, the maximum amount that can be made available under the facility is 85% of the export contract value. However, for a temporary period this has been increased to 95% of the contract value for some transactions for sovereign and public borrowers in developing markets, with a ministry of finance or central bank guarantee. Transactions can benefit from the temporary changes as long as applications are received before November 4, 2023, and the date of the final commitment is within 18 months of the end of the validity period – that is, by May 4, 2025.
As such, UKEF says that the maximum amount that can currently be made available under the facility is 95% of the contract value, and a minimum of 5% of the contract value must be paid directly to the supplier by the buyer before the facility starts to be repaid. The period for payment under the facility is typically two to five years, UKEF says, although this can be shorter or longer depending on the sector and transaction requirements.
“To deliver growth, level up the country and future proof our economy, we need to export more,” said Bowie, introducing the new product. “That’s why UKEF helps businesses of all sizes to expand and start their exporting journeys. The support that UKEF provides is crucial for firms, especially for small businesses while they grapple with the current economic headwinds. That’s why our new bills and notes guarantee is so welcome. It’s the latest in our support for SMEs and provides a faster and more streamlined process to get money in businesses accounts.”
The announcement comes a year after the UK government launched its ‘Race to a Trillion’ export strategy, which aims to almost double UK exports to £1tn by the end of the decade. Whether that ambitious goal will be met remains to be seen: the country’s departure from the EU and the subsequent transition period, along with the impact of the Covid-19 pandemic, supply chain disruption, global recession and the Russian invasion of Ukraine, have all combined to create a challenging trading environment for British businesses.
According to figures from the Institute of Export and International Trade (IOE&IT), the number of UK companies trading internationally fell by 1.9% between the second and third quarters of this year. “Our members, like the vast majority of UK businesses, are experiencing significant economic challenge as they navigate supply chains impacted by inflationary pressures as well as grappling with rising energy costs,” says IOE&IT director general Marco Forgione.
To try and help British exporters weather the storm, UKEF says it has provided “record support” for small and medium businesses in the last year, with SMEs making up 81% of its clients.
UKEF says its bills and notes product is now open to guarantee payments by overseas buyers, and will be made available to financial institutions via a “simple and streamlined” process.