Money makes the world go round
Released on 21st August, the Department for International Trade’s new export strategy is putting finance front and centre. As any good strategy should be, it is in direct response to the requirements of its target audience, the nation’s actual or would-be exporters, whose most often quoted barrier to overseas trade is outlined/set out in thestrategy in the following way:
The problem: Access to finance (lack of working capital and cover for the financial risks of exporting and payment)
The objective: Ensure no viable UK export fails for lack of finance or insurance from the private sector
The solution: UK Export Finance (UKEF),
The concept of helping exporters with questions of finance is not new. A precursor to UKEF, the Export Credit Guarantee Department (ECGD) was set up in 1919, initially to help exporters in the immediate aftermath of the Great War. Over the years it has taken on various guises and, in true government style, sported a range of acronyms. UKEF itself has been in existence since 2010, when it was relaunched as a direct response to the global financial collapse. So, given the initiative is reaching its centenary, what’s new?
The principles remain the same, all neatly wrapped up in the objective above. But there is a new emphasis and some new products to match as market conditions vary and requirements change. For example, the organisation is in the process of further relaxing the eligibility criteria for its range of working capital support products.
A less used UKEF product is the single buyer credit insurance. This cover includes: insolvency of the buyer; the buyer’s failure to pay any amount under an export contract; hostilities or civil disturbances outside the UK that affect performance of the export contract and political, economic or administrative events outside the UK that prevent payments being converted into Sterling or transferred to the UK. This last might include the buyer being sanctioned after the contract has been agreed.
As with all UKEF services, the aim is to complement rather than compete with the private market; this public/private sector partnership approach is one that the strategy is keen to emphasise.
Another new initiative sees UKEF now offering a solution to the second most often quoted barrier to export success:
The problem: Limited networks and contacts
The objective: Connect UK businesses to overseas buyers, markets and each other
The solution (amongst others): UKEF supplier fairs
This service is similar in principle to the well-received ‘Meet the Buyer’ sessions organised by DIT but is built around the intra-governmental opportunities that can be leveraged by UKEF. The premise is the following: UK government, via UKEF, lends money to overseas governments in order for them to fulfil their infrastructure projects. Competitive rates are given to the overseas governments and the more UK suppliers they use to fulfil their projects a greater level of UKEF support becomes available.
It may be an over-used phrase, but this is a ‘win-win’ situation for both sides of the partnership. UKEF is confident that the companies it can put in front of overseas buyers are as good as any in the world, so why not create an environment in which the buyers are encouraged to source as much from the UK as possible?
Clearly the UKEF offer is robust and steadily enlarging, however it is commonly described as a ‘best kept secret’ by those companies who have taken advantage of it. This lack of awareness represents the primary barrier that UKEF itself has to overcome – getting a foothold in the export support marketplace can take time. As with all DIT services though, a meeting with a UKEF adviser comes with no obligation and their services come at no cost. So, why not give them a call. The best things in life are free, after all.
For further information about how UKEF can support your export finances, please contact your local
Export Finance Manager. Derbyshire, Nottinghamshire, Leicestershire, Lincolnshire:
Tony Petersen, T: 07825 276476
E: [email protected]
Jo Archer, T: 07580 742517
E: [email protected]
For all other exporting queries contact the East Midlands office:
T: 0345 052 4001