UK Export Finance: A moment for change?
20 September 2021
The International Trade Committee publishes its report on UK Export Finance (UKEF).
- Read the Full Report [HTML]
- Read the Report Summary [HTML]
- Read the Full Report [PDF]
- Read the Report's Conclusions and Recommendations
- Find all publications related to this inquiry, incluing oral and written evidence
UKEF is the UK’s official export credit agency, which supports UK exporters to find new markets through loans, guarantees and insurance. Its role in protecting exporters and helping them to find new markets is particularly significant following the Covid-19 pandemic and the UK’s withdrawal from the European Union.
The report finds that UKEF has a positive track-record in providing products that support exporters, including new working capital products for large and small businesses, and that its initiatives to reach more SMEs through high street banks and supplier fairs are welcomed.
However, the report notes that much of UKEF’s support has been given to relatively few sectors over recent years, and concludes that it needs to explore ways to reach more of the Government’s priority sectors.
It also explores the effect that the Government’s commitment to end support for fossil fuel projects abroad will have on UKEF, and recommends that the Government should consider amending UKEF’s mandate so that it is better able to take environmental, social and human rights considerations into account when making decisions about which projects to support.
Commenting on the report, Angus Brendan MacNeil MP, Chair of the International Trade Committee, said:
“UK Export Finance has an important role to play in backing exporters. However, it’s clear that UKEF is at a critical juncture and changes will be required if it is to continue to meet exporters’ needs.
UKEF should put serious thought into how it will increase support for renewables projects, or else its actions will continue to risk actively contradicting the Government’s ambitions.
The Government will also need to amend UKEF’s mandate, enabling it to take environmental, social and human rights considerations into account when making decisions about which projects to support.
We thank UKEF for their collaboration over the course of our inquiry and we look forward to receiving the Government’s response to our report.”
Conclusions and recommendations
Fossil fuels and renewable energy exports
The Government’s commitment to end UKEF support for fossil fuel projects abroad is welcome, but this poses a challenge because UKEF has given considerably more support to oil and gas projects than renewables in the past. The UK’s creation and membership of E3F Coalition reaffirms the UK’s commitment to the Paris climate agreement. The Committee welcomes the creation of a “clean industries team” and looks forward to learning its composition, remit and ambitions.
Although UKEF only supported one fossil fuel-extraction project last year, it has continued to provide a significant amount of support to other sectors with high greenhouse gas emissions. The Committee recommends that UKEF consider how it can further contribute to meeting the UK's net zero emissions target by 2030 and ask that it share the outcomes of this consideration by the end of March 2022.
The Committee welcomes UKEF's first climate-related financial disclosure and look forward to seeing more information about the projects it supports.
While many businesses said that UKEF's product range was good, some identified further products that would assist exporters. The Committee recommends UKEF consider introducing contract exchange-rate cover and sector-specific policy wording, and reports back by the end of January 2022 about the viability of doing so.
The Committee welcomes working capital products such as the General Export Facility and Export Development Guarantee which give exporters flexibility. However, some witnesses reported that the eligibility criteria for both products excludes new exporters. UKEF should make sure that it is providing products for new exporters of different sizes and from different sectors.
The Government has told the Committee that it is working on a new financing scheme that will enable UK exporters to find more opportunities in developing countries. The Government should provide more details about its proposed finance offer, including whether it will come from the Official Development Assistance budget, and details of any consultation or impact assessment it has planned or already undertaken.
Companies and sectors supported by UKEF
UKEF's headline figure of 549 businesses supported in 2020–21 could be misinterpreted, as the number of exporters that received its direct support was significantly lower. UKEF should only include the number of exporters to which it has directly awarded products as its headline figure in future Annual Reports and Accounts, with others that have benefitted from secondary support listed as such.
UKEF has traditionally focused on sectors such as manufacturing, energy and infrastructure. While the former Secretary of State was keen for UKEF to develop its support for Government priority sectors where it has traditionally had very little business, the Committee heard that UKEF does not match this ambition. It recommends that UKEF review its business model to consider how it can diversify its business to support more exports from more sectors.
The Committee welcomes the intended expansion of UKEF's network of International Export Finance Executives to 30 and would like an update from UKEF by the end of March 2022 about where these staff will be placed and progress in recruiting them.
Small and medium-sized businesses (SMEs)
Developing a relationship with five of the UK's high street banks has been a positive step for UKEF—ensuring that more SMEs have access to its support. The Committee looks forward to seeing the Government's update to the Public Accounts Committee on its progress in expanding the network of banks it works with and will keep this issue under review to ensure that the UKEF is doing everything it can to reach new customers through its partners.
The information available about UKEF's support to SMEs is unclear and insufficient. UKEF must develop better methodologies for collecting and presenting information, to clearly explain how much support it gives to SMEs.
UKEF has created some exciting developments and opportunities for reaching and engaging SMEs, including its supplier fairs programme, its relationship with high street banks, and the General Export Facility. However, evidence heard by the Committee suggests that there is still a disparity between the access to export finance that SME exporters need and what UKEF provides. By the end of March 2022, UKEF should establish a method for regular consultation with SMEs of different sizes and sectors, so that it can better listen to what they need and to inform its approach to supporting SMEs in the future.
Environmental, social and human rights considerations
UKEF's mission to "ensure that no viable UK export fails" is at odds with the UK's wider environmental, social and human rights commitments, including issues such as modern slavery, bribery and corruption. While UKEF has implemented new policies to identify and manage these risks more effectively, it is still obliged to support projects that are contrary to these commitments. The Committee recommends that the Government amends UKEF's mandate to better reflect the UK's environmental, social and human rights policy objectives, so that its scope to include these in its decision-making is clearer.
The Committee recognise that the LNG project in Mozambique was approved before the Government’s announcement to end support for fossil fuel projects abroad, and that the serious violence that has occurred in Mozambique around Total’s LNG project is out of UKEF’s control. However, UKEF must make its Category A “project supported” notifications available in a more timely manner so that the information about each project’s risks, impacts and the mitigations that have been put in place is promptly publicly available.
While the Committee welcomes UKEF's new policies on bribery and corruption, and is pleased that UKEF is doubling the number of staff working in this area, it should review its anti-bribery and corruption policies and notices to exporters and buyers to ensure that they are clear and consistent with those of its leading G7 counterparts.
The Department for International Trade should publish its new Export Strategy as soon as possible, and by the end of December 2021 at the latest, to reflect the importance of exporters to the UK's economy, and to show how the Government is supporting and championing them at home and abroad.