In an exclusive interview with GTR, the UK’s secretary of state for international trade Liam Fox answers our questions on the finer details of the department for international trade’s 2017 departmental plan, most notably with regards to its plans to grow the country’s defence export market. We also quiz him on recommendations made by the British Exporters Association (BExA) in its annual benchmarking of UK Export Finance.


DIT departmental plan

GTR: The department for international trade (DIT) plans to appoint nine trade commissioners in different geographical regions to promote UK trade and exports. Can you give more detail on how you foresee the trade commissioners delivering the task at hand? 

Fox: The HM trade commissioners will head the global operations of the DIT, leading on export promotion, inward and outward direct investment, and trade policy overseas on behalf of the UK government. Their work will include developing and delivering a regional trade plan in key global markets, which sets out DIT’s priorities across export and investment promotion, trade finance and trade policy.


GTR: In the department plan you say you want to grow the UK’s defence export market. Over half of UK Export Finance (UKEF) support in the last annual report was for defence. Defence exports represent a small share of total UK exports (1.6% in 2015), so why is this a focus growth area and why is UKEF support so heavily skewed for this sector?

Fox: The defence and security sectors are both of huge strategic importance to the UK’s foreign policy, helping to meet the legitimate defence needs of other states and contributing to their security and law and order.

Companies in defence and security also make a major contribution to the UK economy, with £36bn in annual turnover and nearly 250,000 people directly employed.

And, due to the nature of defence contracts, UKEF support is particularly relevant to the sector’s exports. These tend to be high-value contracts, often representing a significant expenditure on the part of overseas governments, so the ability to offer competitive long-term financing alongside world-leading technology and capability is an important factor in UK contractors’ success.


GTR: In the department plan you outline promoting defence in a “responsible manner”. Many defence deals include trade with repressive regimes such as Saudi Arabia, Turkey, Bahrain, Colombia, etc. Many of these countries appear in the foreign office’s list of countries with human rights concerns. How does/will the DIT and UKEF monitor this for conflict of interest?

Fox: The UK government takes its export control responsibilities very seriously and operates one of the most robust export control regimes in the world. We rigorously examine every application on a case-by-case basis against the Consolidated EU and National Arms Export Licensing Criteria. We will not grant a licence if to do so would be inconsistent with these criteria, and UKEF support for controlled sectors is contingent on an export receiving a licence.


BExA recommendations

GTR: The British Exporters Association (BExA) has called for increased transparency of DIT and UKEF so that, at a practical level, exporters, financiers and advisors can better understand policy criteria that will be applied to transactions. The association has called for a complete overhaul of wordy and complex documentation in plain English. Is this something your department recognises and is working on?

Fox: Simplifying access to UKEF support is a priority identified in the UKEF Business Plan for 2017-20, and an area in which we have already made significant progress.

Last year, we introduced a digital application service for bank users and made significant improvements to simplify documentation as part of UKEF’s new partnership delivery model with the five major banks, as well as providing plain-English guidance documentation for exporters and bank users.

And UKEF is continuing to explore further improvements to its digital services for all customers and other users, from the provision of information to transactional functionality. We welcome input and co-operation from BExA and our other stakeholders to help us make sure we’re providing what the industry needs.


GTR: Will UKEF consider allowing non-bank lenders and bond providers to access guarantees?

Fox: We’re very aware of how quickly the UK alternative finance sector is developing, and its increasing importance to our exporters. UKEF already has referral partnerships in place with several non-bank financial institutions and alternative financing sources to widen the pool from which exporters can secure finance.

We are also continuing to engage with these and industry representative bodies – including UK Finance and BExA – to ensure that our support is available to exporters where, when and from whom they need it.


GTR: Basel regulations on capital allocation for export credit agency (ECA)-backed transactions are restricted to lending in the ECA’s home currency. Will UKEF lobby to widen this to include other currencies, such as the euro or the dollar since these are the currencies it predominantly facilitates? Without such a change, won’t UK exporters be at a disadvantage compared to European and US exporters?

Fox: We’re continuing to push within the EU and other international forums for a favourable regulatory landscape for UK business, but whatever the outcome, UKEF is well equipped to help bridge funding gaps, should they arise, with its flexible and innovative product suite.

For example, in January, we announced an even more flexible local currency offering, with finance now available in 62 currencies in addition to pound sterling. That’s an increase of 19 currencies following on from the 30 added in the 2016 Autumn Statement.


GTR: According to BExA benchmarks, UKEF’s SME support in relation to overall support (3% in 2015, 1% in 2016) is low compared to its peers in other countries. Does the department have plans to address
this and how?

Fox: 79% of the companies UKEF supported in 2016-17 were SMEs, and only 21% larger companies. However, by value, the majority of support continues to be for larger exporters, simply because the size of the export contract will be so much larger, so it’s important to look at both volume and value as measures of support.

Since UKEF’s statutory remit was changed in 2011 to allow it to support SME exporters, not just large capital goods companies, the proportion of smaller companies supported has risen every year.

UKEF has been developing new ways to support more smaller exporters, notably our new bank partnership delivery model, launched in October 2017, which is significantly improving the ease and turnaround times for UK SMEs looking to secure UKEF-supported trade finance from their banks. We’ve also widened eligibility for our trade finance products to direct suppliers to UK exporters, allowing companies in export supply chains to access the working capital and bond support they need. And we’re also constantly looking for product and service innovations to further improve our offering for SMEs.