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Boost for exporters and banks as UK Export Finance increases risk underwritten
The news that UK Export Finance will increase the risk it underwrites from 50% to 80% across its Bond Support and Export Working Capital schemes, will enable banks to assist more exporters seeking to maximise opportunities in international trade.
At a breakfast event at the Institute of Directors, representatives from a wide range of banking organisations reacted positively to a raft of developments outlined by David Godfrey, Chief Executive of UK Export Finance, which supports small and medium-sized enterprises (SMEs) and mid-market exporters by sharing financial risks that the private sector is unable to shoulder alone.
Since 2011, UK Export Finance, the UK’s export credit agency, has broadened the trade horizons of over 120 UK-based businesses. Backing almost £1 billion of export contracts to over 65 markets and with a pipeline of a further 300 transactions.
In addition it has given financial advice to over 250 exporters through its 12-strong team of regional export finance advisors who signpost exporters and businesses to banks, credit insurers, brokers, trade support bodies and routes to government support.
A recent NAO report entitled ‘Improving access to finance for small and medium-sized enterprises’ forecasts a potential £22 billion funding gap between the level of finance available to SMEs and the amount they need. Mr Godfrey said:
The role of the export credit agency is even more critical in today’s market. Forging and sustaining powerful partnerships and collaborations between ourselves and banking organisations will be instrumental in achieving the Government’s goal to double exports to £1 trillion by 2020. Exports are vital to the UK’s future growth and we are committed to playing our part in plugging the finance gap to accelerate opportunities for those with the potential to take their business further.
Willie McCoy, Bank of Ireland senior manager of trade finance, commented:
UK Export Finance’s commitment to increase its risk to 80% on most transactions is a formative milestone. The balance sheets of some exporters seeking access to bonds and guarantees are not currently strong enough for banks to approve.
Many businesses need pre-shipment finance and bonds - this development enables banks to access bonds and guarantees and the Working Capital Scheme. The timing is key with the UK’s focus on exporting as a driver of economic growth.
Peter McIntyre, HSBC Head of Trade for UK Commercial Banking, reinforced how collaboration is vital as the world looks to exporters to lead the financial recovery:
We will continue to harness UK Export Finance’s schemes as our international portfolio grows faster than our domestic portfolio. Supporting aspiring exporters with a wealth of diversity and growth opportunities will pay dividends for banks, exporters - and the wider UK economy.