UK Export Finance, the government's trade finance arm, has committed to significantly expanding the number of businesses it supports by 2029, with a particular focus on small and medium-sized businesses, especially those led by women.
The Export Credit Agency, which provides insurance cover on foreign contracts and guarantees on export-related loans, aims to boost its support for SMEs to 1,000 companies annually, a five-fold increase from current levels.
Despite having the capacity for £60bn of business, UK export finance only had £46bn on its books last year. Tim Reed, the agency's CEO, has expressed his desire to boost this number.
Over the past three years, an average of 170 SMEs have received support annually, representing 81 per cent of the agency's clients. However, much of its guarantees have been directed towards large infrastructure, energy and aviation contracts led by industry giants such as Rolls-Royce and BAE Systems.
In its recently unveiled five-year action plan, Export Finance UK sets out strategies to increase support for SMEs. This includes providing more guarantees for working capital and trade finance, facilitating access to other business finance options, and helping small businesses secure contracts on projects supported by UK Export Finance abroad.
In addition, the agency plans to include more alternative small business lenders in its schemes and streamline decision-making processes for loan applications.
According to the agency's projections, these initiatives would result in British companies securing £12.5 billion in export contracts and receiving £10 billion in “clean growth” financing over the next five years.
In a notable development, the UK Export Finance Program recently approved the inaugural support package for oil and gas decommissioning works, providing a $7.5 million loan guarantee to Brazilian company Ocyan to purchase equipment from Scottish company Maritime Developments. More than 70 Scottish companies in their supply chain are expected to benefit from this contract.
The agency usually bears 80 percent of the cost of the loan if the borrower defaults, albeit for a fee. The size of these fees has been criticized in the past, with the British Exporters Association highlighting insurance premiums ranging from 6 per cent to 7 per cent, which is higher than that charged by export credit agencies in other countries.
