The UK government is injecting an extra £20bn of capacity into UK Export Finance (UKEF) as part of a national trade strategy, bringing the agency’s total lending and guarantee limit to £80bn.
A new insurance product aimed at helping small businesses grow their exports, one of UKEF’s key targets for the remainder of the decade, is also being developed.
The government put enhanced support for UKEF, the country’s export credit agency, at the centre of a trade strategy published on June 26, the UK’s first since leaving the EU in 2020.
In addition to the £20bn of fresh operational capacity for UKEF included in the strategy, the agency says it will propose legislation to expand its statutory capacity even further. UKEF’s statutory capacity is a legal limit for how much outstanding debt the organisation may have at any given time.
UKEF is also launching a Small Exports Builder product, which it says will provide smaller firms better access to export protection insurance and streamline overseas buyers’ access to finance for the purchase of UK goods.
The strategy document also includes the expansion of its Regulatory Partnership for Growth Fund, which was piloted in October last year. Now renamed the Ricardo Fund, it aims to help UK exporters by aligning foreign nations’ regulations with UK standards. The government says it expects it to “unlock export opportunities” worth £5bn to UK businesses over the next five years.
The government adds the trade strategy will make the UK “the most connected nation in the world” and will prioritise “quicker, more practical” deals.
Lawmakers have previously criticised UKEF for not providing enough backing to small businesses, and last year the agency pledged to support 1,000 SMEs per year by the end of the decade.
Geoffrey de Mowbray, vice-president of the British Exporters Association, tells GTR the uplift in UKEF’s capacity “is exactly what’s needed to ensure sustained and scalable support for UK exporters. With international trade a key pillar of economic growth, this is a timely and welcome move.”
“The launch of the Small Exporter Builder product is the kind of forward-looking innovation we need, enabling quicker decisions, supporting the development of trading history, and helping UK businesses strengthen their credit offering to overseas buyers.”
Ian Stuart, chief executive of HSBC UK, says the strategy “rightly recognises the challenges many exporters face at a time of heightened global uncertainty. This is a necessary first step in giving businesses the tools they need to thrive on the world stage.”
Beyond export finance, the government says it will introduce legislation to expand its powers to respond to “unfair” trade practices and guard against global turbulence in strategically important sectors.
It will also seek to reform the UK’s trade remedies system, making it more accountable to the government and allowing it to be “more assertive” when dealing with countries that are deemed to distort markets unfairly.
Additionally, the UK will join the Multi-Party Interim Appeal Arbitration Arrangement, a World Trade Organization system for resolving trade disputes whilst the organisation’s appellate body remains without quorum.
Defence funds in, “clean growth” out
The country’s Labour government also unveiled plans on June 23 for UKEF to contribute to a separate industrial strategy, designed to expand the UK’s presence in eight sectors the government sees as having the “highest potential”, including clean energy, defence, and advanced manufacturing.
As part of this strategy, UKEF has received a £3bn increase to its direct lending facility, bringing its total direct lending capacity to £13bn.
The facility offers loans to overseas buyers of UK products, rather than the loan guarantees that are typically provided by UKEF to banks.
In a revamp of the direct lending facility, the agency has axed a £2bn allocation ringfenced for clean growth-focused exports and instead earmarked £3bn for defence exports, following a previous increase to the facility in March that also aimed to stimulate defence sales.
A UKEF spokesperson says outside of the £3bn for defence, “remaining direct lending capacity is available for all sectors, including clean energy industries”.
The industrial strategy also commits the government to reviewing UKEF’s mandate over the next six months, considering whether the agency should “take on a broader trade and investment finance remit”, by introducing more flexibility into its financing criteria for projects supporting and de-risking businesses in the sectors prioritised in the strategy.
The document says it will aim for a pilot programme implementing this broader approach within the next year, focusing on clean energy.
Labour also intends to introduce legislation increasing UKEF’s maximum financial portfolio size, to ensure it “remains competitive with leading export credit agencies around the world”.
Building on the UK’s October announcement that it would use UKEF to support imports of critical minerals for UK exporters, the strategy announces a new loan guarantee scheme for domestic critical mineral suppliers to UK exporters. Details of the scheme are not yet available.
Additionally, the agency intends to expand its network of regional export finance managers to focus on businesses involved in exports that are key to the industrial strategy.
“UKEF plays an instrumental role in delivering our industrial strategy – providing the essential support that British businesses need to compete internationally,” says UK business secretary Jonathan Reynolds.
“By unlocking export opportunities and supporting innovation across key sectors through mechanisms like direct lending, UKEF is helping to drive sustainable economic growth, create highly skilled jobs and strengthen Britain’s place as a go-to trading partner.”
