In his keynote at this year’s Manufacturing Innovation Summit, Phil Potter explained how government-backed finance can give innovative manufacturers the exporting edge.
During a packed day of roundtable conversations, Phil Potter – senior export finance manager for UK Export Finance – took to the stage to deliver his Manufacturing Innovation Summit 2018 keynote.
Potter was representing the nation’s export credit agency, UK Export Finance (UKEF), an organisation tasked with ensuring that ‘no viable UK export fails for lack of finance or insurance from the private sector, while operating at no net cost to the taxpayer’.
There are three primary ways UKEF supports UK exporters, Potter continued:
- Win contracts by providing attractive financing terms
- Fulfil orders by supporting working capital loans
- Get paid by insuring against buyer default
According to the latest annual UKEF report an accounts (published 25 June), government-backed finance and insurance helped UK manufacturers achieve a total of £644m in overseas sales in 2017-18.
This year, UKEF provided £2.5bn of support for UK exporters, which helped almost 200 companies sell to 75 markets around the world. Furthermore, the vast majority (79%) of exporters benefiting from UKEF support are small and medium-sized enterprises.
How it works in practice: Winning contracts
Potter gave the example of Reliance Industries Limited of India – the second largest publicly traded company in India, and the second largest company in India in terms of revenue.
When Reliance Industries was expanding its petrochemicals facilities and setting up the new petcoke gasification project and refinery off-gas cracker, it sought UKEF support for US$300m line of credit to enable it to finance the purchase of goods and services from the UK.
UKEF supported the transaction by providing a 100% guarantee for a loan facility, a move which resulted in more than 100 construction and supply contracts going to UK companies.
The stories of East Sussex-based Webster Griffin (a manufacturer of specialist bag-filling machinery) and Carpenter & Paterson (a specialist pipe suspension equipment manufacturer based in Welshpool) perfectly illustrate the benefits UKEF’s support of Reliance Industries creates for UK businesses.
How it works in practice: Supplier fairs
Through regular UKEF-hosted supplier fairs and one-to-one procurement meetings, UKEF has a strong track record of connecting overseas buyers and major international projects with UK suppliers.
For example, its supplier fair held in November 2016 in support of the Tahrir Petrochmeical Plant in Egypt brought together 137 suppliers, fostered almost 100 one-to-one meetings and secured $1bn in UK supplies.
Its supplier fair held in November 2017 in support of the Duqm Oman Refinery in Oman brought together 187 companies, fostered 114 one-to-one meetings and is expected to secure $250m – $500m in UK s
How it works in practice: Working capital
UKEF can help companies access the trade finance they need to fulfill a contract, giving them the ability to take on more contracts and increase their turnover.
How does it do this? By offering export finance guidance; guarantees of up to 80% to UK companies’ banks who lend working capital for export orders; and guarantee contract bonds up to 80%, freeing up working capital for exporters.
UKEF can also help exporters manage risk in challenging markets, ensuring they get paid even where the private market is unable to offer insurance. It achieves this by offering insurance against non-payment; and should the buyer not pay or cancel the contract, the exporter is covered under UKEF’s policy.
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