Related News

SMEs to benefit from Zimbabwe trade finance credit line

India Exim boosts profit, grows loan book

UKEF backs oil and gas decommissioning project in Brazil

Bumper year for trade credit insurance, but claims rising

ECAs continue to debate fate of Mozambique LNG project

UK Export Finance (UKEF) has vowed to support 1,000 SMEs per year before the end of the decade, a big jump on current levels.

The export credit agency (ECA) unveiled the target in its 2024-29 business plan this week. The plan also includes pledges to enable £12.5bn of export contracts and provide £10bn of “clean growth” financing by 2029.

UKEF’s support for SMEs is closely scrutinised by UK lawmakers, because small businesses tend to find it harder to secure trade and export finance, compared to their larger peers.

A handful of large companies, such as Rolls-Royce and BAE Systems, have previously scooped up the largest share of UKEF’s financial support by value.

While the number of SMEs benefiting from UKEF’s backing is already high as a proportion of the agency’s overall customers, it still falls far short of the target of 1,000.

Around 210 of the 251 customers UKEF supported in the 2023-24 financial year were SMEs, the agency says in its most recent annual report. Further SMEs indirectly benefit from UKEF’s products by winning contracts from the agency’s direct clients.

The new target includes SMEs both directly and indirectly benefiting from UKEF activities.

“Private lenders’ commercial risk appetite remains the largest barrier to supporting more SMEs,” UKEF says in the business plan.

“We will work with and expand our bank and financial institution partners to develop approaches that will enable UKEF to improve awareness of its offering and provide leaner, more flexible solutions for SMEs across the UK.”

UKEF says it plans to boost its assistance to SMEs partly by on-boarding non-bank financial institutions that specialise in small business finance.

A source at UKEF says such financial institutions would likely provide financing backed by a UKEF general export facility guarantee and need to have prior experience with trade finance.

UKEF says in the business plan it will do “more to help SMEs access finance from the private market”, which the source says is likely to be through helping recommend commercial finance providers.

In 2021 UKEF was criticised by a cross-party parliamentary committee, who said following an inquiry into the agency that “much of UKEF’s support goes to relatively few large-scale manufacturing, energy and infrastructure projects each year and it still struggles to understand and meet the needs of other exporters, including SMEs”.

The Federation of Small Businesses told the committee’s inquiry that many of its members “have reported being left disappointed in the support, or lack of, that they have received from UKEF”. An industry association for exporters has also rebuked UKEF for what it said is steep pricing compared to other European ECAs.

UKEF plans to ease SMEs’ access to its services by introducing “digital and automated services” with faster response times. It says a focus for the next five years will be “developing our offer for the overseas buyers of SMEs” and “modernising and expanding our insurance offering”.

The agency’s plans have the backing of the UK government. In a letter to UKEF CEO Tim Reid, Minister for Exports Lord Offord wrote: “I want UKEF to significantly increase the volume of small businesses it supports over the course of this business plan cycle.”

 

Focus on “underserved” firms

Elsewhere in the plan, UKEF has set itself a target of helping UK companies win over £12.5bn in export contracts by 2029. It also aims to maintain the current level of 80% of its supported businesses being located outside of London, a key target for successive governments who have been wary of London’s economic dominance in the UK economy.

For the first time, the agency will also seek to define and measure “underserved businesses”, including women- and minority-owned businesses.

The commitment echoes work begun in 2021 by UKEF’s US equivalent, the US Export-Import Bank (US Exim), to set up a dedicated group of specialists to help underserved business owners access that agency’s services.

In 2020, UKEF was one of the first ECAs to phase out financing for the fossil fuel sector, and in the business plan, it aims to provide £10bn in “clean growth finance” by 2029.

The agency says it will achieve the target by “developing our transition offering, ensuring UKEF provides tailored support to businesses, large and small, who are looking to transition to net zero”.

Many ECAs in Europe have introduced products designed to stimulate environmentally sustainable businesses or help polluting firms transition away from fossil fuels, partly due to pressure from climate change campaigners.

Late last year, UKEF became a founding member of the Net Zero Export Credit Alliance, pledging alongside the other participating ECAs to become climate-neutral by 2050.