The UK’s export credit agency is in its centenary year. Baroness Rona Fairhead, the country’s Minister of State for Trade and Export Promotion, reflects on its 100 years of support for UK businesses and global trade.
In the modern world of international trade, many countries have their own export credit agency (ECA) charged with providing government-backed finance and insurance to support exports – but it was not always this way.
In 1919, the UK government, seeking to kickstart British exports following the First World War, established the world’s first ECA. It was called the Export Credits Department. Today it is known as UK Export Finance (UKEF) and sits at the heart of the government’s Export Strategy to support and promote businesses on the world stage.
This year, UKEF celebrates its centenary, marking 100 years of success and innovation, and so I wanted to look back at the department’s past and look ahead to what will come next.
Supporting economic growth
During the First World War the UK economy concentrated its manufacturing efforts on producing materials to support the war effort. As a result, our overseas buyers began to look elsewhere for their manufactured goods.
The submarine blockade and attacks on British merchant vessels that saw millions of tonnes of shipping sunk to the bottom of the Atlantic further compounded the problem. By forming an export credit agency, the post-war UK government recognised that finance and trade was the key to the country’s economic recovery.
Fast forward a hundred years and UK exporters – with support from UKEF – are contributing to projects around the globe, including the development of post-conflict infrastructure, for example in Africa and the Middle East.
Just in the last few months UKEF has provided support worth nearly £1.2bn for the construction of three hospitals and power infrastructure upgrades in Angola, two new power stations and 14 substation upgrades in Iraq and 250 rural bridges in Sri Lanka.
These transactions will significantly improve the critical infrastructure and lives of the citizens of those countries, showing the positive role that British expertise, combined with UKEF’s backing, is playing in communities around the world.
As the world’s first export credit agency, UKEF has continued to innovate from day one. We have celebrated a number of “firsts” in recent years, including the first sukuk (sharia-compliant bond) backed by a western ECA, the first ECA involvement in hybrid finance structure comprising both project finance and reserve-based lending, and the first non-Chinese ECA guarantee for a loan in Chinese Renminbi – now one of 65 international currencies in which UKEF can offer financing.
It is no good to have such a well-respected and innovative tool if you don’t use it to its full potential. This is why we have placed finance – and UKEF’s offer – at the heart of the government’s Export Strategy, which seeks to increase UK exports to 35% of GDP and put the UK at the forefront of global trade.
To help achieve this, we have added a further £2bn to UKEF’s direct lending facility, recognised as a “game-changer” by the British Exporters Association (BExA). This will be available in 2020/21 and 2021/22, helping UK businesses build connections all over the world as the UK establishes itself as an independent trading nation following our departure from the EU.
Ensuring that smaller companies get the support they need to export is also a priority for government. For example, supplying to a company that exports is a great way for smaller firms to enter a new market. That’s why UKEF now works in partnership with five major banks to deliver UKEF-backed finance directly to smaller companies, and has broadened its support beyond exporters, to the wider supply chain.
UKEF is also actively connecting UK exporters to international opportunities through our programme of procurement-led ‘supplier fair’ events. These connect international buyers (with contracts that are backed by UKEF financing), with UK suppliers with products and services, which could fulfil the buyer’s procurement needs.
It’s safe to say that UKEF has lost none of its capacity to be flexible and innovative over the last hundred years.
UKEF has helped hundreds of UK businesses achieve international success, and our ambition is to do even more. In 1920, UKEF had a maximum total exposure of just £26mn. Today, our maximum commitment stands at £50bn. This reflects the scale of our ambition for UK exports.
UKEF has for 100 years been innovating and helping UK businesses win, fulfil and get paid for export contracts, and will continue to do so into the next 100.