BExA responds to International Trade Committee Inquiry on Covid-19 impact
BExA has submitted a response to the
International Trade Committee’s Inquiry on the impact of the Covid-19 pandemic
on international trade.
“The current situation is
unprecedented in impact and scale. Businesses are being impacted through no
fault of their own and should receive the help they need to survive this crisis
and to continue creating employment and generating wealth,” says BExA.
In its six-page submission, BExA notes that
the UK government’s response to the negative impact of the pandemic on UK
businesses has been swift and positive in message, but has been lacking in
implementation. “Access to the support schemes needs to be simplified and
accelerated,” it says.
As an example, BExA explains that large organisations with split credit ratings are
waiting an unacceptably long time before receiving responses on the Bank of
England Covid Commercial Finance Facility (CCFF) scheme, leading to delays and
uncertainty in putting in place much-needed additional liquidity facilities.
Similarly, smaller businesses are struggling to access the British Business
Bank’s (BBB) Coronavirus Business Interruption Loan Scheme (CBILS). The scheme is
operated via accredited lenders, which receive a
government-backed partial guarantee (80%) for the loan repayments in order to
encourage more lending. This leaves lenders, who apply for the scheme on
behalf of their clients, responsible for 20%
of the loan should the borrower default. It has meant that a large
number of applications are being rejected before they get to the BBB as lenders
are evaluating applications based on the stricter lending criteria brought in
after the 2008 financial crisis. BExA believes that lenders either need to be
guided to relax these criteria or HMG needs to cover 100% of the loan. This
adjustment will also assist in drawing in more lenders to the scheme.
BExA goes on to outline a
number of suggested improvements that government could implement, including
that HMRC’s ‘PAYE payment deferral plan’, which appears simple to access and for
which HMRC takes 100% risk, could form the basis of accessibility to the BBB’s
Elsewhere in its
submission, BExA notes that it believes the government’s Export Strategy,
unveiled in mid-2018, is the key piece of legislation that will mitigate the
medium and long-term impacts of the pandemic. “The UK needs to look outside its
borders and grow business through export. We should have a renewed focus on
breaking down the barriers to export and HMG needs to increase its efforts on
implementing the aims of the Export Strategy,” BExA says.
Furthermore, BExA emphasises that as
well as working capital, companies will need market access support and readily
available export finance support, including from UK Export Finance (UKEF). Addressing the specific steps that UKEF could
take, BExA’s suggestions include that UKEF plays a more active role in covering
the debtor books of UK exporters in cases where payment delays are being
experienced; and that it improves its product offering to include revolving
lines of credit for smaller business and reintroduces its Letter of Credit
In terms of the wider
government approach, BExA urges that all forms of support be streamlined and
as easy to access as possible. It further proposes an improvement
of information available to exporters, many of whom are not aware of some of
the schemes designed to assist them; the removal of tariffs if trading on WTO
terms; and a realistic outlook of what can be achieved regarding Brexit given
the time lost focusing on the pandemic, and suggests that a delay would be
BExA’s submission addresses all eight
of the points raised by the ITC in its inquiry:
- What impact will the global Covid-19 pandemic have on UK businesses
trading internationally, in the short-, medium- and long-term?
- How effectively has the Government responded, both in the UK and in
overseas posts, to the short-term negative impact of the pandemic on UK
businesses trading internationally? What further steps could be taken to
mitigate this impact?
- What medium- and long-term negative impacts could arise from the
pandemic for UK businesses trading internationally? What steps could the
Government take to mitigate these impacts?
- What steps can UK businesses take to mitigate the negative impacts
of the pandemic on international trade?
- How best can the UK Government facilitate trade in essential goods
during the pandemic?
- How should the Department for International Trade work with the
rest of central government, as well as devolved, local and regional
government, to deliver a coordinated response to the pandemic?
- How can the UK Government engage with countries at the World Trade
Organization and bilateral trading partners – including those with which
the UK has a significant trading relationship or one facilitating trade in
priority goods – to promote international cooperation and a coordinated
global response to the pandemic?
- How might the pandemic impact global trade patterns and
international supply chains in the long-term?
Posted 27 April 2020