UK Export Finance has suspended its guarantees for trade deals with Greece in light of the uncertainty surrounding the country’s eurozone membership.

The export credit agency has stopped processing new applications for cover on exports from the UK to Greece, though it is unclear whether guarantees already agreed upon will be affected.

“Given the current uncertainties as to how the situation in Greece is going to evolve, we are not processing any new applications at the current time and we are considering our cover policy in the light of developments including the outcome of the referendum and operational experience of the recently imposed foreign exchange controls,” UKEF says in a statement.

According to the agency’s 2014/15 annual report, its exposure to Greece currently stands around £2mn, down from around £5.5mn in 2013/14. A UKEF spokesperson tells GTR: “As the situation in Greece has been deteriorating for some time, our short term business exposure is now with just a handful of companies and whilst for our longer term business we have some aerospace exposure, in reality our actual total exposure is relatively small. We are keeping in close contact with our exporters who have an interest in Greece and we will continue to do so.”

With the Greek people overwhelmingly rejecting the bailout terms proposed by European leaders in a referendum last Sunday, followed by the resignation of finance minister Yanis Varoufakis, the odds of Greece exiting the eurozone are growing by the day.

Company payment behaviour is expected to deteriorate significantly, with increasing delayed payments as well as non-payments. Ludovic Subran, Euler Hermes

The Greek government is due to present a new reform package to its creditors this Wednesday (July 8). Time is precious, as the country’s €3.5bn payment to the European Central Bank is due on July 20, and euros are already becoming hard to find since capital controls were imposed and Greek banks closed their doors last week. Without another liquidity injection from the EU, Greece will be forced to print its own money to continue to operate, exiting the eurozone de facto, and causing great disruption to trade payments.

UKEF cover is the first victim of that uncertainty, but others could follow. Contacted by GTR, Euler Hermes chief operating officer Philipp Rossberg says: “We are not formally off-cover, but whilst capital controls remain in place and the ECB-funding lifeline to the Greek banks continues to be effectively clogged up, it is rather hard to see how new exposure could actually be written,” adding that they are monitoring the situation very closely.

In a July 2, pre-referendum note, Euler Hermes chief economist Ludovic Subran wrote: “Following the imposition of capital controls, company financing from banks is non-existent and domestic payments rely on existing working capital. Payments abroad are currently frozen, although with a few exceptions.

“Company payment behaviour is expected to deteriorate significantly, with increasing delayed payments as well as non-payments. DSOs (Days Sales Outstanding) already stand at a very high level. Several sectors have been identified as highly vulnerable to insufficient financing or supply disruption risk – stemming from frozen imports – and these include machinery and equipment, oil and refined petroleum, computer and IT services and vehicles.

“Overall, GDP is likely to fall by 1.5% in 2015 as domestic demand contracts and imports are disrupted and there will be further upward pressures on consumer prices. Business insolvencies are expected to rise by 10% from an already high level.”