UK Export Finance Pledges Increased Support for SMEs
The UK government's trade finance arm, UK Export Finance (UKEF), has committed to significantly expanding its support for businesses, particularly small and medium-sized enterprises (SMEs), by 2029. This focus on SMEs, especially those led by women, aims to boost their participation in international trade.
UKEF currently provides insurance cover on overseas contracts and guarantees on export-related loans. The agency plans to increase its support for SMEs to 1,000 per year, a fivefold increase from current levels. This ambitious goal aims to unlock the potential of smaller businesses and contribute to the UK's economic growth.
Despite having the capacity for £60 billion of business, UKEF only had £46 billion on its books last year. The agency's chief executive, Tim Reid, has expressed a desire to boost this figure and maximize its impact on the UK economy.
Historically, UKEF's support has primarily focused on large infrastructure, energy, and aviation contracts led by industry giants. However, the new strategy emphasizes empowering SMEs by providing more guarantees for working capital and trade finance, facilitating access to other business finance options, and assisting them in securing contracts on UKEF-supported projects overseas.
To further enhance its support for SMEs, UKEF plans to onboard more alternative small business lenders to its schemes and streamline decision-making processes for loan applications. These initiatives are projected to result in UK companies securing £12.5 billion in export contracts and receiving £10 billion in "clean growth" financing over the next five years.
In a recent development, UKEF approved its first-ever support package for oil and gas decommissioning work. This $7.5 million loan guarantee to Brazilian firm Ocyan for equipment procurement from Scottish company Maritime Developments is expected to benefit over 70 Scottish firms in the supply chain.
While UKEF typically shoulders 80% of the loan cost in case of borrower default, the agency has faced criticism for the high fees associated with its services. The British Exporters Association has highlighted premiums ranging from 6% to 7%, significantly higher than those charged by other countries' export credit agencies. This issue requires further attention to ensure that UKEF's support remains accessible and attractive to SMEs.