Overseas markets: Time to reach out
Louis Taylor explains how the UK's export credit agency is realising overseas opportunities for UK businesses
I’ll begin with a story about a company called Page Bros in Norwich, which produces academic journals and books.
This company, which has a trading history dating back to 1746, recently secured an export opportunity in the Far East: a two-year contract worth almost a third of its previous year’s turnover. All good news, but the size of the opportunity threatened to put a strain on its cash flow.
However, UK Export Finance (UKEF) was able to provide a guarantee for 80 per cent of an extended working capital facility from their bank. This released the funds required for Page Bros to fulfil the contract, without changing their own suppliers’ terms. It also gave Page Bros the confidence to seek further overseas opportunities.
UKEF has offered help in hundreds of similar situations in recent years. Interventions vary from guarantees supporting working capital or export-contract bonds issued by finance providers, to offering or guaranteeing loans to overseas buyers. We also offer insurance against failure to pay by the buyer, which has been used recently by companies selling to Greece and Ukraine.
Beneficiaries of UKEF’s support include exporters of all kinds of goods and services, from educational books to undersea cable systems in the energy sector.
'Exporting is GREAT'
You may have seen the new HM Government 'Exporting is GREAT' advertisements, which show the exciting world of opportunity out there for UK companies.
The government is placing a strong emphasis on help to exporters, co-ordinating support across many departments and agencies. Trade finance is a critical piece of this jigsaw and UKEF, the UK’s export-credit agency, is the government’s dedicated support mechanism filling gaps in the private market and making exports happen.
UKEF works alongside commercial banks and private-sector insurance brokers to explore where a government guarantee, loan or insurance policy might help to close a transaction and make an export happen.
It seeks to complement, not compete with, the private market, often working with banks or insurers to expand or enhance the support they can provide. In return, the government charges a premium to cover potential losses and protect the taxpayer.
Challenges facing SMEs
UKEF is currently partnering with the British Business Bank to review the finance challenges facing SMEs which export or are looking to export.
This will ensure that government support best addresses their needs. And with new powers available under the Small Business, Enterprise and Employment Act, UKEF is working to widen the eligibility for its support, for example to firms that, while not exporters themselves, nevertheless supply exporters.
UKEF also has a growing track record of providing assistance through its network of regional export finance advisers (EFAs), introduced in 2012. As well as introducing companies to UKEF’s schemes, EFAs can introduce them to a wide range of support, and work with commercial trade finance and insurance providers to shape the best solution for the exporter.
UKEF is an important part of the whole-of-government push to encourage and support smaller companies to start exporting, and works alongside the widely recognised support available via UK Trade & Investment. With all our partners, we look forward to helping more firms achieve their global trade ambitions in the years ahead.
This article also appears in the January edition of The CA magazine.