UK Export Finance – help for Exporters

The UK Export Finance (UKEF) Department is probably one of the best kept secrets in British trade, which is a shame because they are potentially one of the most effective and helpful government departments that can offer assistance to UK exporters.

UKEF is the operating name of the Export Credits Guarantee Department (ECGD), which in turn is the export credit agency of the United Kingdom and, as a Government department, derives its statutory authority from the Export and Investment Guarantees Act 1991, as amended by the Industry and Export (Financial Support) Act 2009.

UKEF offers support to UK companies of all sizes, from one-man bands to large corporations and on transactions that range from £4,000 in value to £2 billion.  The support varies from short-term to medium and long term support and in the 2012-2103 financial year, UKEF supplied British business with £4295 million worth of support (compared to £2318 million in 2011-12, £2924 million in 2010-11, £2206 million in 2009-10 and £1460 million in 2008-09).

Since 1919 ECGD had been a powerful force in British trade, but during the 1990’s it was felt that there was little need for the UK Government to provide financial support since exporting companies seemed to be well supplied through the private banking sector.  However, after the 2008 global financial crisis, a lot of banks that had historically supported long term financing for export projects became constrained in their ability to fund export credit loans for a number of reasons, such as the lack of US Dollar liquidity.  This had implications for the ability of banks to provide export credit loans in support of UK exports.  So the UK Government decided to step in again with the objective of using UKEF to compliment the private market by providing assistance to exporters and investors, principally in the form of insurance and guarantees to banks.

UKEF can assist UK exporters in a number of different ways, but the best starting point is to contact one of the regional Export Finance Advisors (EFA) and their details can be found as follows: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/192259/UK_Regional_Regional_Export_Finance_Advisors_.pdf

One of the products that UKEF offers to British exporters is to provide guarantees to banks offering loans to overseas buyers of UK goods and services through the Export Refinancing Facility.  This £5 billion scheme is aimed at supporting British exporters by ensuring that overseas buyers have funding.  This is presently industry-specific, namely Aerospace, Oil and Gas Extraction equipment, transport and telecommunications infrastructure services, hospital construction and management and sports infrastructure.

This means that customers in other countries (as long as they meet various conditions) could be helped to access funding that avoids the need to obtain a Letter of Credit.  (Although UKEF also has a Letter of Credit Guarantee Scheme as well).  In addition UKEF has a direct lending scheme (presently at £1.5 billion) which enables it to support loans to buyers of UK Goods and Services when funding is not available through the banking services.

This direct lending scheme became operational in Autumn 2013.  In some areas, such a scheme already exists, but is for very specific projects.  For example, UKEF presently supports a USD 1 billion line of credit, originally issued in November 2011, for the Brazilian energy company Petrobas, which is used to purchase UK supplies.  This is a model which UKEF is hoping can be replicated through the High Value Opportunities programme.

In 2012-2013 Buyer and Supplier Credit worth £2184 million (through 175 facilities) were utilised by British exporters.

As well as issuing guarantees, UKEF also offers insurance against loss for or on behalf of exporters of goods and services and overseas investors from the UK.  Essentially this is a service which has always been provided, but originally under the auspices of ECGD.

The organisational structure of ECGD is such that there is a definite separation between the customer relationship function undertaken by the Business Group and the financial risk assessment and pricing carried out by the Credit Risk Group.  ECGD uses Standard & Poor’s ratings as a based for sovereign risk, but interestingly enough, of the 125 countries rated by both Standard & Poor and ECGD, ECGD’s rating accords with theirs in 119 instances only. ECGD also rates a further 95 countries which are not rated by Standard & Poor.  This offers very wide ranging support, but there are limits to the commitments that ECGD can have in both sterling and foreign currencies, as dictated by the Export and Investment Guarantees Act.

With regards to the Supplier Credit insurance, in the financial year 2012-2103, UKEF supplied £1547 million (through 79 facilities).

The Overseas Investment Scheme provides political risk insurance in respect of UK investments made overseas.  These are divided globally as follows: 30% Europe, 40% Middle East and Africa, 21% in Asia and 9% in The Americas.  In 2012-2013, UKEF supplied £17 million worth of support in this area.

UKEF have two other products which should be mentioned.  The Bond Support scheme helps to release exporter’s working capital that might otherwise have been held as security for a bond.  The Export Working Capital Scheme provides additional capacity to banks who are providing working capital finance to exporters to help them fulfil specific export orders.  In 2012-2013, UKEF supplied £547 million support through 114 facilities with these two schemes.

My personal experience with this department is that they are good at answering the phone and putting you through immediately to someone who can help with your particular enquiry. The assistance that the EFAs can give goes beyond the products mentioned above and at the moment, anyway, I do rate this service highly.  Whether this continues to be the case as the department grows I have no idea, but at the moment they are doing some very good work. In some circumstances UKEF may not be able to assist everyone who exports, but I don’t think that anyone can lose anything from asking.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training.  She is based in the United Kingdom.  If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com or check out other articles on International Trade on the Point to Point Export Services website at www.point-point.com

 

Comments are closed.