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Bridging smaller and medium sized exporters’ funding gap will boost exports in 2014

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This feature was placed by UK Export Finance

When Chancellor George Osborne gave his Budget speech two years ago, he challenged British businesses to double exports to £1 trillion by 2020 – and exporting continues to be central to the sustained recovery of the UK economy.

Figures released by the Office of National Statistics suggest that the rebalancing sought by the Chancellor is indeed underway with trade, investment and consumer spending having grown during the fourth quarter of 2013.

What has been most encouraging is that the largest contribution came from net trade – giving a welcome boost to British companies already exporting and those seeking to move into overseas markets.

This year both UK business investments and exports are forecast to grow with the manufacturing sector expected to be the key driver, increasing to 2.7%. In fact, 55% of manufacturers surveyed predict an increase in exports to the Mexico, Indonesia, Nigeria and Turkey (MINT) markets.

However, a recent National Audit Office report – Improving Access to Finance for Small and Medium-Sized Enterprises – forecasts a potential £22 billion funding gap between the level of finance available and the amount needed.

As the UK’s Export Credit Agency, UK Export Finance can help to bridge this gap through strong partnerships with exporters, banks and trade associations so that businesses can grow their order books overseas, drive local job creation and boost economic growth.

During 2012/13, UK Export Finance provided British businesses with £4.3 billion of support. They included companies like Houlder – see case study below – who came to us for help after winning a three-year contract in Libya.

Our Trade Finance and Insurance Solutions Group, which helps exporters with business on shorter payment terms, has supported over 100 companies in the past two years, mainly smaller and medium sized businesses, to fulfil export contracts worth over £800m.

With UK Export Finance sharing risk with the banks, exporters have been able to reduce their level of risk without restricting their cash flow, increase their working capital facilities and in some cases, significantly increase their turnover and expand their business. We have also enabled exporters to trade in markets where private credit insurance cover was unavailable.

UK Export Finance aims to be supportive to business through the economic cycle. Further strengthening our partnerships and collaborations will be vital in our drive to support the Government’s ambitious goals, which will mean more companies exporting – and exporting to more markets.

Paul Croucher is head of Trade Finance and Insurance Solutions at UK Export Finance 

For further information on UK Export Finance and our support schemes, visit our website, contact our national customer service team on 020 7271 8010 or email customer.service@ukef.gsi.gov.uk.

Case study: UK Export Finance supports design and engineering company Houlder take on major Libyan deal with three of its products

UK Export Finance’s support helped London-based Houlder Ltd to expand into new international markets and increase its workforce.

The company won a three-year contract to project manage the construction of a floating storage and offloading vessel off the coast of Libya. The client, an oil and gas company, asked Houlder for an advance payment bond worth 10% of the contract value and a performance bond.

Houlder turned to UK Export Finance after its bank issued the bonds but asked for 100% cash cover to secure them. Houlder used the UK Export Finance Bond Support Scheme to guarantee 80% of the contract bonds while the bank guaranteed the remaining 20%.

UK Export Finance then issued two Bond Insurance Policies (covering unfair calling of the bonds or fair calls for political reasons) for the advance payment and performance bonds – and put in place an Export Insurance Policy (covering non payment of amounts due under the contract). These policies covered the company for 95% of the amount Houlder deemed to be at risk of non-payment.

The entire arrangement allowed Houlder sufficient capital to fund the contract, protect against payment risk and begin work.

The Libyan contract, Houlder’s biggest to date in terms of value, has boosted the company’s workforce – with 12 new staff hired to support the project and further recruits expected this year.

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