The chief executive officer of UK Export Finance is Louis Taylor, a seasoned international businessman with a deep understanding of global markets and what UK manufacturers need to do to serve them.
The Manufacturer’s editorial director, Nick Peters, spoke to him at UKEF’s headquarters in Whitehall.
The need for British companies to seek markets beyond our shores has always been vital, but it seems never more so than now. Brexit will bring with it new trade relationships, and the opportunity for manufacturers to sell to new overseas markets.
This can be a daunting challenge, particularly for smaller companies, which is why the government provides financial backing for exports through UKEF (UK Export Finance).
Last year, UKEF provided £3bn of support to 221 companies in the form of export credits for their customers, guaranteeing bank finance for buyers and the working capital needed for exports, and credit insurance to protect exporters in the event of customer default.
Brexit is obviously around the corner. How can you help UK manufacturers find the new markets the government says exist for UK products outside the EU?
Louis Taylor: Our mandate is good for whether the UK is in or out of the EU. We’re filling in gaps in the provision of finance and insurance from the private sector. We have the ability to bring British companies together, to address very large projects in particular.
As an example: we might bring to the UK a project sponsor from Egypt who has a petrochemical plant to build along with their procurement contractor. We will offer the Egyptian company finance, then put them in a room with 200 UK export-ready companies who will learn about the opportunity, hear that they’ll get paid and that they can access working capital backed by the UK government, and talk to the procurement contractor about the specifications, the goods and services that are needed for the opportunity.
So, by doing this, we can really help to introduce British exporters to the opportunities abroad.
UKEF worked with 221 companies last year. There must be many more exporting without using UKEF.
The vast majority of trade from the UK with the rest of the world happens without government support, and that’s absolutely fine. We’re there to fill in the gaps, and we worked directly with 221 companies last year. But we have an ambition to help very many more.
There are small manufacturers out there who may not know that they’ve got an export-ready product. What could you do to prepare them to become an exporter?
I’ve already mentioned one of the ways we can help, by helping to connect them with overseas customers, and de-risking the process.
But we can also ensure companies access the working capital and bond money they need, in particular through five big high street banks with whom we are partnering to provide our guarantees.
When those banks can’t or won’t lend to a company to provide them with working capital, we offer a guarantee to that bank to induce them to lend. That’s how we help companies fulfil export orders, by helping their banks provide working capital.
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Is there not a danger that what you’re doing is actually giving the banks an excuse to say that they won’t work on a bilateral basis with a company, and they’ll just use the government as a form of guarantee mechanism?
Well, our support is provided in partnership with banks and we do require them to take on part of the risk. So, the guarantee we will give to the bank is only up to 80% of the facility; they still have to lend 20%, and we charge for the service that we provide.
We won’t charge more than the market, but we won’t charge much less. It’s not a subsidy, but it does create a facilitation for transactions that otherwise wouldn’t happen.
Manufacturing at the moment is pretty vibrant. There’s a lot of demand out there for our products, so manufacturers are investing in capacity. They’re getting ready. Where do you see the biggest opportunities? Can you signpost any of those for our readers?
Absolutely. I travel regularly, and I can assure you and your readers that the demand for British goods and services abroad is incredibly high. They are seen as hugely high-quality and are much in demand.
Where should we be ambitious? UKEF has identified 20 countries that we see as priorities, which are predominantly in developing markets, because most of the major developed markets are deep liquid capital markets that don’t need our support.
But the developing markets where we see interest are in the Middle East, in Sub-Saharan Africa, across Southern and South-Eastern Asia, and in Latin America as well.
Any particular sector that should be saying to itself, ‘I should be getting into this exporting game?’
There’s a variety of sectors that are very vibrant – anything to do with infrastructure, smart cities, healthcare infrastructure, education, and transportation infrastructure. Quite a lot of what we’ve been doing recently has been around the oil and gas and petrochemical industries because we fill in gaps in private sector provision.
Currently, there’s a huge amount of liquidity going into renewable energy, which we’d love to support, but we’re not needed. The need for our support tends to be more in oil and gas and petrochemicals.
I don’t think many people realise quite how much of the export cake is down to manufacturing – 48% of all exports are manufactured goods. That’s pretty good, isn’t it? We should be proud of the fact, but aim to cross the 50% line as soon as possible.
You’re absolutely right! If you read the media, you wouldn’t think that we were a manufacturing country at all. Yet, we’re the eighth largest manufacturing country in the world by output, exporting £270bn last year, just a little under half of our total exports.
We are the second largest exporter of services in the world, and the products of most manufacturers now, particularly those of a sizable nature, have services embedded in them as well.
We absolutely have an opportunity to grow our manufacturing exports, and we have the ability to support exporters as they look to increase the number of markets they operate in and the size of the transactions that they do.
Do you have a wish list that hasn’t been fulfilled by the government, that you you’d like to add to your service portfolio?
The Chancellor has already been incredibly generous with UK Export Finance over the past two years. He has allowed us to double our risk appetite and to double the country risk limits across the globe, which means we have more capacity to support British exporters.
We’re able to reinsure risk we take on in the private markets, again increasing the exports that we can support. The government is hugely ambitious, and so are we. But remember, we’re not like the private sector of a financial institution that can choose to grow and grow its business.
We’re filling in gaps. There’s no reason for the taxpayers to take on risk whenever the private sector is perfectly prepared to do it.
Is size or product category ever a qualification for a company before they can qualify, or indeed be disqualified, for help from UKEF?
Happily, there’s no size qualification for or disqualification from UKEF support. In fact, the vast majority – nearly 80% – of the companies that we helped last year were SMEs, and many of those were first-time exporters.
Actually, it’s not only exporters that we can support, it’s the suppliers into exporters that we can support as well, companies that may not themselves be able to export but are supplying an exporter as part of an export supply chain.
We’re absolutely able to offer working capital support to small companies in those supply chains. Size is no barrier. If we’re offering finance to a foreign customer of a UK exporter, we tend to need a minimum size of around £5m. But otherwise, we do transactions of every size. I think the smallest transaction we supported last year with credit insurance was less than £10,000!
UKEF – powering the UK’s exports
- Last year, UKEF provided £3bn of support to 221 companies
- Nearly 80% of supported companies were SMEs
- UKEF has identified 20 countries as a priority, predominantly in developing markets
- The UK is the eighth largest manufacturing nation in the world, with exports worth £270bn last year, just under half of our total exports
- A company does not have to be an exporter to get UKEF support – suppliers to exporters are also eligible
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