Small Business, Enterprise and Employment Bill

Written evidence submitted by The British Exporters Association (SB 52)

http://www.publications.parliament.uk/pa/bills/cbill/2014-2015/0011/15011.pdf

1. The British Exporters Association (‘BExA’) is a membership organisation representing some 90 corporates. Our membership is drawn from across the exporting community, including capital goods manufacturers and international traders (large corporates, MSBs, SMEs and Micro exporters), and their bank, credit insurance and other service providers. BExA takes a particular interest in trade finance and export credit insurance and supports the objectives of the 2011 National Export Challenge.

2. BExA’s interest in the Small Business, Enterprise and Employment Bill (‘the Bill’) is focused on the provisions contained in Clauses 9 and 10 to widen the powers of the Secretary of State under UK Export Finance’s (UKEF) governing Act, the Export and Investment Guarantees Act 1991 (as amended) (‘EIGA’), Clauses 4 and 5 regarding access to finance for small and medium sized enterprises (‘SMEs’), the protection of credit data and retention of control by the SME over disclosure to third parties of its credit data and Clause 33 regarding Public Procurement processes.

3. The proposals in Clauses 9 and 10 demonstrate the Government’s acknowledgement that UKEF operates in a competitive OECD Export Credit Agency (‘ECA’) environment. When enacted, these changes have the potential to represent a key driver towards the Chancellor’s stated ambition to make UKEF the most competitive European ECA. The changes will not, however, address the continued actions of non-OECD ECAs (including China) in offering enhanced terms that OECD ECAs are unable to match. Work should continue to bring these nations under the OECD framework to enable a level playing field for all exporters.

4. We welcome the intention to change the EIGA through Clause 9 of the Bill to address some key BExA recommendations for UKEF including the widening of UKEF’s remit since this has the potential to maximize UKEF’s ability to support exports. We trust that the changes will address:

a. Provision of direct support, including export credit insurance, finance risk support, guarantees of general working capital facilities, or advice or information to UK businesses that are, or wish to become, involved in exporting.

b. Support where there are complex contracting chains or financing arrangements including where exports are made via overseas subsidiaries or joint venture companies.

c. Support for SME exports worldwide, whatever the destination.

d. The ability to support both the development of and export of software, intellectual property rights, financial services and other intangibles.

e. Support where the customer or end-customer is overseas yet delivery is within the UK or in UK waters.

f. Scope to support projects and business ventures overseas to which goods or services sourced from UK exporters are directly or indirectly supplied.

We trust that the phrase ‘which the Secretary of State considers are conducive..’ will not be a barrier to support for exports as methodology and processes naturally evolve.

5. It is critical that in future UKEF should be able to provide facilities for ‘the exporter’ rather than individual ‘export contracts’. Support is needed whether the exporter is in an export supply chain, a contractor, or is exporting in its own right. Global trade is conducted under a wide variety of contractual arrangements, including the increasing prevalence of delivery via or by utilizing the services of overseas subsidiaries of UK corporates or joint ventures, to meet overseas buyer’s local content requirements. A broadening of UKEF’s remit to accommodate all types of contracting structure, including those that will evolve in future, and all exporters, be they direct or indirect, is logical and something BExA fully supports.

6. In October 2014, BExA’s also launched its Manifesto for Exporters – http://www.bexa.co.uk/docs/BExA%20Manifesto%20October%202014.pdf. The Manifesto sets out 5 recommended Action areas for UKEF focused on Accessibility, Support to SMEs, Medium Term Products, Co-operation with the Private Market and Resourcing. These Actions are supported by BExA’s annual benchmarking of UKEF’s product portfolio and business performance against its ECA peers ‘UK Export Finance: Supporting the National Export Challenge’ – http://www.bexa.co.uk/docs/BExA%20UKEF%20ECA%20Benchmarking%20pape%20Oct%2014.pdf. BExA believes that the enactment of the Bill will increase demand for UKEF’s support. In order to maximize the impact of the changes to UKEF’s remit as set out in the Bill, BExA believes that action needs to be taken by UKEF in each of the areas identified in our Manifesto.

7. BExA supports the provisions of Clause 10 of the Bill which would allow the Secretary of State to increase by order, up to three times, the foreign currency and sterling limits on the liability incurred by UKEF in supporting UK exports and investments overseas and managing its portfolio of risks, but such limits should be calculated after any purchase of reinsurance from investment grade carriers. Such flexibility represents an appropriate management practice that should be retained by the Secretary of State. In addition the removal of the requirement to consult with the Export Guarantees Advisory Committee (EGAC) on matters of re-insurance with other ECAs is welcomed by BExA as being practical change to EGAC’s role which is to focus solely on ethical issues related to export contracts.

8. BExA welcomes moves to improve access to finance for SMEs. The provisions of Clauses 4 and 5 of the Bill relate to the potential widening of access to finance for SMEs and to ensure the appropriate safeguarding of credit data. We do not see that the option to regulate the sharing of financial information will necessarily lead to improved lending; financial institutions and credit reference agencies cannot be compelled to share opinion and strategy. SMEs should be encouraged to share more information about themselves to financiers. The Consumer Credit Act can be used by SMEs to correct data. Rather than each Act having its own definition of SME, the Government should set a ‘universal’ definition, for example based on the EU guideline [1] .

9. A strong domestic market is invariably key for manufacturers wishing to export. A track record of selling to, or being part of the supply chain for, UK public procurement programmes represents a UK ‘stamp of approval’ for the manufacturer. The relationship between domestic sales success and consequent export potential needs, in the context of a free and open tendering regime, to be recognised through the public procurement process. In addition so as to ensure a level playing field between the domestic bidder and overseas competitor, the domestic supplier should not be disadvantaged in instances where the international competitor can access support from its ECA. BExA believes that these considerations should be recognized under the provisions of Clause 33 of the Bill.

10. SUMMARY

BExA supports the objectives of the Bill and its motives of increasing support for SMEs in a number of areas. In relation to export, the bill has the potential to extend UKEF’s remit enabling UKEF to support a wider base of UK exporters and to more complex export contracting structures.

October 2014


[1]

[1] http://ec.europa.eu/enterprise/policies/sme/files/sme_definition/sme_user_guide_en.pdf

Prepared 31st October 2014