Exporters get a little credit

Posted on 7 Mar 2011 by The Manufacturer

The Government has unveiled a new scheme to provide exporters with better access to finance.

The Department for Business, Innovation & Skills (BIS) last month established an extension to its Enterprise Finance Guarantee Scheme (EFG), offering export finance of up to £1m to small and medium sized businesses.

The Export Enterprise Finance Guarantee Scheme, expected to be launched in April, will be made available to businesses with a turnover of up to £25m. Like the existing EFG, it will be accessible through the major high street banks and other commercial financial institutions.

Meanwhile, the Export Credits Guarantee Department (ECGD) will launch an Export Working Capital Scheme for those not eligible for the Export EFG, offering export finance worth over £1m.

Additionally the EGCD will launch a Bond Support Scheme which will see Government share the risk attached to contract bonds with the lender and share the credit risk of foreign exchange hedging contracts issued to small and medium sized businesses. It will also extend its existing short term export insurance to cover a broader range of exporters.

With Government having regularly stated this year that exports will be a key factor in the growth of the UK economy, Trade and Investment Minister Lord Green and Trade Policy Minister Edward Davey said these schemes answer calls from businesses for help with finance and protection from the “uncertainties of international trade”.

“The Government will offer an expanded, better coordinated range of products to large and small businesses alike, working closely with the banks to widen access to the capital and credit insurance exporters need to make the most of their opportunities,” said Lord Green.

“Our exporters are crucial to securing the recovery and we want to do everything we can to help them grow. This new support will help British exporters compete and win business overseas.” These announcements were received warmly by the major trade organisations.

“An export-driven recovery will need improved access to finance, particularly for those companies looking to make greater inroads to faster growing, and ultimately riskier, markets,” said Steve Radley, director of policy at EEF, the manufacturers’ organisation. “If the private sector is going to generate the right type of growth through exporting, companies going after new contracts must have confidence that the finance and support to meet those orders is available.” John Cridland, director-general of the Confederation of British Industry, said the new schemes will help to put UK companies on a level playing field with European competitors.

“Many of these new finance products are already on offer by most of the other G8 countries, so this scheme will bring the UK up-to-speed in competition terms.

“There’s a particular need to tackle export under-performance in smaller companies, so SMEs should be encouraged by these new trade finance products designed to help them break into foreign markets and grow their businesses.” He said Government’s challenge now is to market the products correctly so that businesses can benefit from them.


Meanwhile, economic analysts The Item Club from Ernst & Young said last month that UK companies should be focussing their export efforts on the emerging BRIC countries: Brazil, Russia, India and China.

Although at present only 5% of UK goods and services land in BRIC countries, in its report, The outlook for UK exports, The Item Club estimates that the value of UK exports to these countries could increase by 11.7% each year until 2020.

This is because a 14% annual rise in the average household income across the four should fuel increased consumer spending. Electrical goods, optical and high-tech goods, and minerals and metals are predicted to be the biggest benefactors of this. The report also predicts that total UK exports to all countries will increase by 8.5% per year over the next 10 years.