BExA's 12th annual benchmarking of UK Export Finance

The British Exporters Association’s (BExA) 12th annual benchmarking of UK Export Finance (UKEF) titled ‘Sustainable Exporting’ provides an analysis of UKEF’s activities, reflects upon the range and quality of support to UK exporters over the period April 2020 to March 2021 and offers comparisons with other countries’ export credit agencies (ECAs).

The benchmarking report praises UKEF for stepping up to support exporters during the pandemic, and for the increase in its business volumes.  However, concerns remain around turnaround times and premium pricing. 

The report reviews the 10 recommendations that BExA put forward to UKEF at the end of 2020 in that year’s benchmarking paper, analyses the progress made around each suggestion, and makes new proposals based on what growth has been achieved. It also provides two new recommendations for 2021 and presents a series of suggested actions to drive progress in these areas.

The 12 recommendations are:

1. Working with exporters to deliver a clear action plan, DIT’s Export Strategy must ensure that the UK is positioned to repair its economy post-pandemic and deliver on its aims of £1trn of exports by 2030.
2. Grow awareness and knowledge of UKEF’s General Export Facility (GEF) and Export Development Guarantee (EDG) for high value loan facilities so UK exporters can benefit from them, and address the excessive security requirements for SME GEFs.
3. UK Export Finance should work with the private market to cover Tender to Contract (TTC) FX risk for SMEs in tradeable currency pairs without restrictive security requirements.
4. UKEF should adopt a more market-based risk appetite and ensure premiums are best priced first time to ensure UK exporters are competitive without needing to challenge pricing.
5. UKEF should work with the Foreign, Commonwealth & Development Office (FCDO) to promote UK exporters and develop a concessional lending product. Countries hit hard by COVID will be seeking concessional support.
6. UKEF’s Export Insurance Policy (EXIP) should adopt more “plain English” principles and wording, avoiding cross references and being clear about what risks are being covered.
7. To improve speed, transparency and accessibility, UKEF should give their underwriters more power rather than splitting tasks into component parts, and invest in digitising its offering.
8. Pressure on direct lending limits should be alleviated by making Commercial Interest Reference Rates (CIRR) available on other products.
9. The government’s fossil fuel policy should be reviewed to remove a “cliff-edge” approach to financing and ensure UK businesses keep pace with sustainable transitions and are not left behind.
10. The phasing requirement of the IFC/World Bank standard ESIA report for UKEF credit applications should be reviewed so costs are only incurred when it is certain that projects will be approved. This can be a condition precedent of drawdown.
11. Provide a source of liquidity for SMEs needing help accessing UKEF products, utilising private sector partnerships and building on the positive work of the British Business Bank during the pandemic.
12. UKEF should renew focus on lobbying Basel regulations to allow capital allocation by banks financing UK capital exports in € and $ to be eligible for the same treatment as EU and US exporters financing in home currency.

One of the new recommendations for 2021 focuses on the UK government’s new fossil fuel policy which prevents UKEF from financing overseas oil and gas projects, with BExA calling for it to be reviewed in order to remove a “cliff-edge” approach to financing and thereby ensure UK businesses keep pace with sustainable transitions so as not to be left behind by their overseas competitors. 

The other new recommendation centres on the wording of UKEF’s Export Insurance Policy (EXIP), which BExA believes would benefit from adopting more “plain English” principles, avoiding cross references, and being clear about what risks are being covered.   In reviewing advancement on 2020 recommendations, BExA welcomes the launch of the Government’s new Export Strategy – “Made in the UK, Sold to the World” - in November 2021. The strategy represents an impressive commitment to developing exports, with an ambitious target of £1trn of exports by 2030.  In the report, BExA also applauds UKEF’s Export Development Guarantee (EDG) and General Export Facility (GEF), which are considered to be game changers for UK exporters, and recommends that these products be marketed effectively to ensure as many exporters as possible benefit from the support.  With Tender to Contract (TTC) foreign exchange rate cover still missing from UKEF’s portfolio, its score for product range has been pegged at 9/10. However, lobbying by BExA for the introduction of TTC has continued, including submission of evidence to the International Trade Select Committee inquiry into the work of UKEF.  In its response this month to the inquiry report, UKEF has stated that “we will work with BExA over the next few months to understand if there is a viable product that will complement what is on offer from the private market and report back”.

Chief Executive of UK Export Finance, Louis Taylor, said, “We welcome BExA’s findings which recognise the historic amount of work we’ve done to support UK businesses throughout the pandemic. At UKEF, we have undergone massive changes to make sure our products remain suitable for exporters facing today’s challenges and will also help them to grow in the future. We won’t stop there. By continuing to support more sustainable projects and working with organisations like BExA to expand our offer, we will help exporters sell more of what is made in the UK to the world.”

A full copy of the report can be downloaded here.