Louis Taylor is Chief Executive of UK Export Finance (UKEF), the UK’s export credit agency. Here, he provides a progress report on what UKEF has achieved since he started in October.
From my first day at UK Export Finance (UKEF), I saw our mission as a simple one: to ensure that no viable UK export should fail for want of finance or insurance. Six months on, that hasn’t changed, but the path towards achieving this ambition has become clearer. It involves:generous collaboration with partners, in business and in government building on our culture of performance and innovation ensuring those we can help are aware of what we can do.
I joined at an exciting time for UKEF, with a recently expanded statutory mandate, an ambitious business plan, and a product suite that had seen great innovation. This included our direct lending facility and a shariah-compliant Islamic finance facility as well as support for loans in offshore renminbi – the latter two being GTR award-winning deals that added to our capital markets products, providing another source of funding for our transactions. My priority on joining UKEF was to ensure that we could make the most of these powerful new opportunities to support even more British exports.
The UK government had also renewed its focus on empowering more UK businesses to export, with the cross-government Exporting is GREAT campaign working towards an ambitious target of 100,000 new exporters by 2020. Making sure the right finance is in place is a critical piece of the jigsaw for any company looking to sell overseas and we are here to provide support when needed. And we now have a new Minister for Trade. Lord Price’s stellar career at Waitrose, which exports to 50 countries, makes him the ideal leader to energise government to deliver on supporting exports and exporters.
Support for SMEs
So we know what we need to achieve and why. How do we achieve it? First we will broaden the support available for small and medium-sized enterprises (SMEs). I believe our solutions need to become more deeply embedded in the fabric of the exporting community and export finance. This means working ever more closely with banks and other finance providers. We will continue our push to improve awareness among their relationship managers of how support from UKEF – and the rest of government – can help their customers. We will work with them to develop more flexible products that best meet their customers’ needs. We will develop the scope and reach of our support for exporter cashflow as we broaden the circumstances in which we share risk with banks on working capital loans or contract bonds.
In recent months, a number of our partner banks have made commitments to support the government’s efforts to encourage more companies to sell overseas. For example, Lloyds Banking Group’s admirable SME Charter, published in March, includes an undertaking to support 25,000 new exporters by 2020. To do this, Lloyds has committed to even closer co-operation with UKEF, the British Business Bank and UK Trade and Investment (UKTI).
Other banks are coming forward with similar pledges, demonstrating a clear will on all sides to improve our joint offering to companies that are looking to sell overseas.
In the meantime, as mentioned in the Budget 2016, UKEF is trialling steps that aim to cut the transaction times for accessing trade finance products by half. If successful it will be rolled out to all participating finance providers, allowing them to issue eligible contract bonds and working capital loans on behalf of their SME clients with an automatic UKEF guarantee for up to 80% of the bond’s value. The removal of duplicative processes, especially around credit and other due diligence procedures, will reduce turnaround times for SME customers, thereby increasing take-up and the overall levels of support that banks are able to offer to SMEs. At the moment, the trial is limited to one bank, but a wider roll-out will be launched if this trial is successful.
In addition, I want us to work more closely than ever with businesses themselves – including through the British Exporters’ Association and other industry bodies – to understand how we can best meet their needs for export finance and insurance.
An example of how we are listening to the feedback we receive from these groups is the introduction of new policy documentation. While our willingness to provide cover in difficult markets has always been welcomed, it must be said that the length of our policy documentation has not. Incremental improvements in recent years had some positive effect, but after extensive consultation with industry bodies we are now preparing to release fully redesigned proposal and application forms in plain English. These are shorter and far clearer, in particular for SMEs that don’t have the resources larger companies do to tackle application processes. These forms will be more readily available on our website, making the whole journey from search to approval quicker and easier.
We also plan to work more closely, and at an earlier stage, with UK exporters on export opportunities, helping them to make their offering as competitive as possible. We want to help them to win contracts, not just to fulfil contracts that have already been won. In particular, high-value contracts are not just wins for the prime contractor, but bring enormous benefits for the UK supply chain. We estimate that for every company UKEF supports directly, an average of about 30 smaller firms benefit within export supply chains.
Unlocking new markets
As an example, we can look at the exciting emerging markets in Africa. With huge economic growth and rapid physical, financial and technological infrastructure development required to support it, there is great potential for UK exporters. However, a recent survey we undertook in partnership with Africa House and UKTI showed that companies in the UK see African markets as particularly challenging. The main perceived barriers include an inability to find local partners, a lack of market knowledge, and poor government relations.
To overcome such barriers, UKEF has undertaken a number of market visits to the region both to educate embassies and consulates regarding UKEF products, and, more importantly, to inform local governments of the UKEF offer.
Having recently joined the African Trade Insurance agency – the pan-African trade finance and insurance initiative – we are in a better position than ever to give UK companies guidance on the right local contacts to help them win contracts in those markets in the knowledge that payment risk can be effectively managed.
The Exporting is GREAT initiative can also help UK businesses, by helping to find the opportunities, then signposting towards the right source of support, be that from a commercial source or from government. UKEF is very much a part of this, helping companies compete for business overseas, and where we can’t help, we will point them towards the right advice.
We see these strategic partnerships as an important tool in our mission to support exporters. Other examples include recent memoranda of understanding with the China Export & Credit Insurance Agency (Sinosure) and the Export Guarantee Fund of Iran (EGFI); each of these helps UK businesses to benefit from a competitive joint offering, and from the expertise and market knowledge of international counterparts.
Our partnership with EGFI, Iran’s ECA, is part of a whole-of-government effort to expand the two countries’ relationship, of which trade is a critical part. Following the recent extensive economic and financial sanctions relief, UKEF immediately reintroduced cover to support UK exporters seeking to trade with Iran. UKEF can provide support to exports in all sectors, including early priority areas such as aerospace, financial services, infrastructure, technology and oil and gas sectors, all sectors in which UK businesses have significant expertise.
Furthermore, in recognition of the UK’s place as a global centre of excellence for financial and professional services, UKEF is willing to offer cover of up to £50mn guaranteeing payments to professional advisory service providers working for the government of Iran. While disruption to banking services in Iran remains a challenge for would-be exporters, the government is working closely with banks and the relevant international authorities to seek a solution. UKEF is committed to supporting UK-Iran trade and is developing tools to do so.
What I hope this all shows is that these are exciting times for UKEF. We know that being innovative and flexible is one of the most important characteristics of a successful export credit agency.
We can’t always know what is on the horizon, so UKEF’s plan is to be a ‘through-the-cycle ECA’. Like all ECAs, we need to be responsive to the needs of modern businesses operating in the modern UK economy, and at the same time make sure we still fulfil our original mission: to make sure viable exports happen.