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UK Export Finance (UKEF) offers loans, guarantees and insurance to help UK exporters. Its role has become more significant as UK exporters look further afield to find new markets following the UK’s withdrawal from the European Union, and the Covid-19 pandemic.
In December 2020, the Prime Minister announced that the UK would no longer fund fossil-fuel extraction projects abroad. We note that UKEF has a history of funding considerably more oil and gas projects than renewables, and suggest that this policy change poses both a challenge and an opportunity for UKEF. We welcome the strides that UKEF has already made in response to this policy change, and we look forward to seeing how its work to support green exports develops. However, UKEF also supports other projects with high fossil-fuel emissions, and we recommend that it considers what further steps it could take to help support the Government’s net zero emissions target.
We heard from businesses and business groups that UKEF offers an excellent range of products that both protect exporters and encourage overseas buyers to purchase UK goods and services. In particular, we welcome the new working capital products—the General Export Facility and the Export Development Guarantee—which are valued by exporters. We also commend UKEF’s ongoing efforts to reach more SMEs, including through its supplier fairs programme and partnership with high street banks.
We also heard that much of UKEF’s support goes to relatively few large-scale manufacturing, energy and infrastructure projects each year and that it still struggles to understand and meet the needs of other exporters, including SMEs. We recommend that UKEF regularly consult with more SMEs so that it can better understand what they need, informing its approach to supporting them in the future. We note that the Secretary of State for International Trade has outlined her ambition for UKEF to support the Government’s priority sectors, and are concerned that UKEF does not match her ambitions in this area.
We heard that UKEF’s mandate to support all viable exports does not currently give it scope to exclude projects on the basis of environmental, social or human rights considerations. The Government must amend UKEF’s mandate so that it has a clearer basis on which to make decisions that reflect the UK’s wider policy objectives in these areas. We also heard that, due to the scale and the type of projects that it supports, UKEF has a significant potential exposure to bribery and corruption issues. While UKEF’s recent doubling of the size of its team tasked with managing bribery and corruption risks is welcome, it should not appear to be complacent in this area and should ensure that its policies and practices in these areas are in line with those of other G7 nations.
Witnesses told us about the value that cross-Government support can bring to exporters when pursuing opportunities abroad, particularly in today’s increasingly competitive international environment. We look forward to seeing the Department for International Trade’s new Export Strategy, to be published later in 2021, so that businesses understand how different Government departments will work together to support UK exports abroad.
Throughout this inquiry we have heard that there is more that UKEF can do to improve its transparency. For example, UKEF’s headline figures for the number of businesses it directly supports are unclear and open to misinterpretation. Similarly, the information that UKEF makes available about the projects it has supported is insufficient to understand how much support it has given to projects in different sectors or to SMEs.