UK Export Finance: Economic impacts of our support 2021-22
Updated 30 June 2022
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We estimate that the £7.4 billion of new loans, insurance and guarantees provided by UKEF in the 2021-22 financial year:
- Supported up to £4.3 billion of UK Gross Value Added (GVA) – equivalent to the economic output of Darlington and Harrogate combined.
- Of which £2.8 billion went to workers as compensation of employees (wages) and £1.5 billion to businesses as gross operating surplus (profits).
- Supported up to 72,000 UK Full-Time Equivalent (FTE) jobs.
- Of which 40,000 is estimated to be directly employed by exporters and a further 32,000 jobs supported indirectly through the UK supply chain of exporters.
1. Jobs supported modelling methodology
The methodology utilises GVA and FTE effects contained in the input-output analytical tables produced by the Office for National Statistics (ONS). These effects show the increase in GVA and FTE jobs required to meet an increase in final demand by £1 million in each industry. Similar input-output analysis methodology has been used for by Export-Import Bank of the United States (US EXIM) and Department for International Trade to estimate the number of jobs supported by the US EXIM and by UK exports, respectively.
FTE effects show how many FTE jobs are required to produce £1m of output in each industry – i.e. the “jobs intensity” of production. To produce the estimate of jobs supported by UKEF, we multiply the FTE effects by the value of UK exports (matched by industry sector and adjusted for price inflation to align with the latest FTE effects publication) to estimate the number of FTE jobs UKEF has supported. From the published FTE effects and multipliers, we are also able to calculate both the ‘direct’ and ‘indirect’ FTE effects. Direct FTE effects show the jobs used by the exporter to produce the exported goods and services, whereas indirect FTE effects show the jobs used by the businesses that supply goods and services to the exporter.
The value of GVA, compensation of employees and gross operating surplus supported by UKEF are estimated using the respective effects and applying them to the (nominal) value of the UK exports supported by UKEF in 2021-22.
The breakdown by UKEF products and accounts (business segments) given below is based on internal management information data for each business supported by UKEF.
2. Definitions
It is important to note that we are not estimating the number of newly created jobs or economic output – in other words, jobs and economic output that would not have existed without UKEF’s financial support.
Jobs are measured in terms of Full-Time Equivalents (FTEs) – which standardises hours worked – to account for different work patterns. For example: a part-time employee working 20 hours a week may only count as 0.5 FTE, whereas full-time work consists of 40 hours.
Gross Value Added (GVA) is a measure of economic output – the value of goods and services produced in an economy, minus the cost of all inputs and raw materials used in the production. It is closely linked to the national Gross Domestic Product (GDP) which is the sum of GVA and net taxes on products.
GVA can be thought of as the sum of all incomes generated by UK resident individuals and firms in the production of goods and services. This is known as the ‘income’ measure of GVA, and it is comprised of compensation of employees, gross operating surplus and mixed income, and taxes less subsidies on production.
Compensation of employees is broadly analogous to employees’ wages – it is the GVA that is attributed to workers. This is the total benefits or remuneration received by employees, including wages, salaries and employers’ social contributions like pensions.
Gross operating surplus and mixed income is broadly analogous to profits for businesses and the self-employed. It is the share of GVA not going to paid employees.
Taxes less subsidies on production (or net taxes on production) captures the value of net taxes generated in the production of goods and services that are not transfers, for example business rates.
Full definition of UKEF’s products and accounts can be found in the Annual Report and Accounts.
3. Results
3.1 Table 1: Estimates of FTE jobs supported by UKEF
| FTE jobs | 2021-22 |
|---|---|
| Direct | 40,000 |
| Indirect | 32,000 |
| Total | 72,000 |
| By Account | |
| Account 2 (guarantees and insurance) | 58,000 |
| Account 3 (guarantees and insurance issued on written instructions of Ministers) | - |
| Account 5 (direct lending) | 2,000 |
| Account 6 (Temporary Covid Risk Framework) | 12,00 |
| By Product | |
| Buyer credit guarantee | 19,000 |
| Insurance | 7,000 |
| Bond or export working capital support | 2,000 |
| Direct loan | 4,000 |
| General working capital | 40,000 |
*Rounded to nearest 1,000 jobs. Figures may not sum due to rounding.
3.2 Table 2: Estimates of GVA and its components supported by UKEF
| GVA | 2021-22 |
|---|---|
| Direct | £2.3 billion |
| Indirect | £2.0 billion |
| Total | £4.3 billion |
| Compensation of employees (wages) | |
| Direct | £1.5 billion |
| Indirect | £1.2 billion |
| Total | £2.8 billion |
| Gross operating surplus and mixed income (profits) | |
| Direct | £0.7 billion |
| Indirect | £0.8 billion |
| Total | £1.4 billion |
| Taxes less subsidies on production | £0.1 billion |
*Figures may not sum due to rounding.
4. Key assumptions:
We match UK economic output to the ONS’s effects by the industry sector defined by Standard Industrial Classification (SIC) codes. Where an exporter has multiple SIC codes, we use the average FTE effects across all relevant SIC codes.
The ONS’s latest input-output tables are estimated using 2018 data. Therefore, we assume that the historical relationship between FTE jobs, GVA and output hold for 2021-22.
The value of UK economic output is based on estimates of UK content associated with the contracts supported by UKEF.
Economic output supported by UKEF’s general working capital products may not necessarily be exported. Therefore, our estimates relate to UK firms’ economic output, not necessarily UK exports.
Due to the nature of the guarantees that make up the bulk of UKEF’s business, we cannot estimate the value of UK economic output spread over the true “production period”. For instance: a £100m construction or manufacturing export contract supported by UKEF in 2021-22 may take 3 years to fulfil. Our estimate of jobs supported by this contract could in fact be spread over those 3 years, depending on when the contracted activity is carried out.
Our estimates reflect the maximum number of jobs supported by UKEF’s loans and guarantees as we do not know if all loans will be fully drawn (but at the same time, we cannot say that they will not be fully drawn).
5. Limitations
Our methodology does not estimate what would have happened without UKEF support, so these estimates do not measure the additional contribution that UKEF’s support has made to the UK economy (i.e. estimates of jobs supported, not created).
The ONS’s estimates of FTE effects are derived from historical relationships and based on industry averages, which may not be representative for UKEF-supported firms (for example due to differences in labour intensity of production between exporting and non-exporting firms). This is also based on a static observation of data – FTE effects could change as a result of exporting, as firms adapt their methods of production to new markets.
Use of FTE in this analysis means that we can’t identify the number of people employed (headcount jobs), as one FTE may represent a single person with multiple jobs, or one job spread among several workers.
As is inherent in the analysis of any large dataset, given data limitations and numerous assumptions, our results should be treated as indicative rather than precise estimates.