At the start of a three day trade trip to Brazil, the Chancellor of the Exchequer, the Rt Hon George Osborne MP, announced the next stage in the government’s fundamental overhaul of finance for British exporters.
The Budget announced expansion of public-sector direct lending; today the Bank of England announced plans to support expansion of private sector lending for exporters. These measures will move the UK to the top of the global league for export support.
In a speech to business leaders in Rio de Janeiro, the Chancellor:
announced, following discussions with the Governor, a significant step to increase availability and cut the cost of private-sector lending for exporters, and welcomed the Bank of England giving finance guaranteed by UK Export Finance (UKEF) access to its Sterling Monetary Framework facility, to help make such lending less risky
confirmed a doubling in size of the UKEF direct publicly-financed lending facility for exporters to £3 billion and the cutting of its interest rates by a third
Taken together these measures for private and public export finance, which have been welcomed by key British exporters, will help achieve the government’s aim to give the UK the most competitive export finance in Europe and put it on a par with the United States.
In 2012 to 2013 UK Export Finance provided loan guarantees worth over £2 billion in total. Today’s new announcement could help reduce the cost of private-sector export finance loans by 5 to 10 basis points.
Following the Budget, the British Exporters Association (BExA) revised its rankings to show that the UK now has some of the most competitive support for export finance.
The Chancellor also announced:
UK Trade and Investment (UKTI) will invest £4 million a year to triple the number of mid-size business advisors to support the export ambitions of 3000 companies, as part of its new strategy
UKTI will invest a further £2 million a year to increase its presence in Latin America to mirror the successful expansion strategy it has pursued in China
The Chancellor announced that part of this additional investment in Latin America will be focused on ensuring a lasting infrastructure investment legacy from the partnership between Britain and Brazil as consecutive hosts of the Olympic Games.
The Chancellor said UKTI will focus on backing British businesses seeking to secure contracts in over £1.5 billion of infrastructure projects around Brazil.
This will build on the £1 billion worth of contracts UKTI has helped British companies secure in Brazil in 2013 to 2014.
The Chancellor will also meet with a range of British companies exporting to and expanding in Brazil. During his visit:
Rolls Royce will announce a commitment to build a £22 million marine facility in Rio de Janeiro
Lloyds will announce that Hiscox decision to join their Brazil reinsurance platform will boost the amount of business it does in Brazil
The Chancellor’s will start his trip in Rio de Janeiro with his keynote speech followed by visits to Rolls Royce, Lloyds of London, and GE Wellstream.
He will then travel to Sao Paulo where he will meet with his Brazilian counterpart, Guido Mantega, and the Governor of the Central Bank of Brazil, Alexandre Tombini.
He will finish his trip to Brazil on Wednesday with a visit to the Brazilian Stock Exchange and meetings with the finance and asset management industry.
The Commercial Secretary, Lord Deighton, who played a leading role in delivering the London Olympics will accompany the Chancellor on the trip.
Over the last decade the Brazilian Economy has tripled in size, and now ranks as the seventh largest in the World.
UK trade with Brazil has increased by over fifty per cent in the last four years but still accounts for less than one per cent of total UK exports.
In his speech the Chancellor said:
“For decades we have not been exporting enough - not just to Brazil, but to all the fastest growing markets in the world.”
“So I am confronting that historic weakness head-on.”
“In my Budget last month I fundamentally reformed our export regime.”
“I cut the tax on flights to emerging markets, including Brazil, so that you don’t pay more to fly to Rio or São Paulo, or indeed Beijing, than Washington or New York.”
“And I massively extended the financial support we give to our exporters.”
“I am doubling the amount of government lending for exports and cutting the interest rates on that lending, by a third.”
“I am clear: Britain will no longer have some of the least competitive export finance in Europe. We are going to have the most competitive export finance in Europe.”
“But the job is never done and so today I can announce further reforms.”
“Where Budget boosted government lending - today we will boost private lending too.”
“Banks will now have access to a special Bank of England facility that will make it much less risky for them to extend loans to our exporters.”
“That should mean billions of extra lending will be made available to our exporters.”
“And it will mean cheaper lending - saving potentially millions of pounds for large projects.”
“That’s how we make British exporters competitive.”
The Chancellor’s trip comes during the government’s Export Week in which over 70 nationwide events are taking place to encourage small and medium sized businesses to export.
Speaking about the increased investment for UKTI, Lord Livingston, Minister for Trade and Investment, said:
“Mid-sized businesses have the potential to be economic powerhouses for the UK economy, creating jobs and growth for all regions of the UK.”
“Exporting helps companies grow and increasing support for small and medium-sized companies is a vital part of the government’s long-term economic plan to create jobs and reduce the deficit.”
“Research shows that exporters do better with UKTI’s help and this new money will allow us to offer every mid-sized business a relationship manager who can provide tailored trade advice and an intensive programme of support to help them break into new markets. I encourage any company with global ambitions to contact UKTI.”
Mike Rees, deputy group chief executive of Standard Chartered Bank, said:
“Stimulating trade is fundamental to the health of the global economy and from a UK perspective, a vibrant export market lies at the heart of sustaining strong economic growth.”
“The government has made clear its ambition to double UK exports by 2020 and this move gives banks an increased level of comfort for lending which is guaranteed by UKEF. It will enable the banking sector to better support UK businesses who are already exporting or who wish to start doing so.”
Alan Keir, chief executive HSBC Bank plc added:
“HSBC welcomes the changes announced today by the Chancellor and Bank of England that will provide further support to British exporters.”
“By giving finance guaranteed by UK Export Finance (UKEF) access to the Bank of England’s Sterling Monetary Framework facility exporters are assured of more sustainable and affordable funding even in times of stress.”
Mark Elborne, GE president & CEO, UK & Ireland also added::
“We welcome the recent announcements by the UK government which mark a significant shift in support for British exporters.”
“In 2013 GE committed £16.3 million and £11.2 million to R&D expenditure, creating in excess of 122 new jobs and safeguarding 88 existing jobs at Wellstream in Newcastle.”
“We welcome the Chancellor’s further commitments to support UK manufacturers and exporters and as a result of the overhaul of UK Export Finance we now expect to use its facilities to support future exports to Brazil.”
Nigel Taylor, senior vice-president at Airbus, said:
“Airbus, as a major UK exporter and many of whose customers benefit from UKEF support, welcomes this initiative which should make UKEF guaranteed paper more liquid and therefore contribute to reducing the overall pricing of export credit.”
£22 million Rolls-Royce Marine facility to be built in Rio de Janeiro
The Chancellor announced on Monday that Rolls-Royce is to build a new Marine facility in Duque de Caxias, Rio de Janeiro.
The new facility, which will provide testing and assembling of thrusters and engines to equip Petrobras’ drillships helps Rolls-Royce further expand their operations in Brazil in the Energy and Marine sectors.
Rolls-Royce is one of the world’s leading manufacturers and has a growing presence in Brazil. They now employ around 600 people in the country, across operations in Rio de Janeiro, Sao Bernardo do Campo, Niteroi and Macae.
In the last year UK Trade and Investment have supported British companies in winning over £1 billion in contracts in the oil & gas and marine sectors in Brazil. With their help Rolls Royce was awarded an £86 million energy services contract by Petrobras in November 2013.
Chancellor welcomes insurer’s plans to boost Brazilian activity
The Chancellor has welcomed the decision by insurer Hiscox to join the Lloyd’s Brazil reinsurance platform during his trip to Brazil.
Joining the Lloyd’s Brazil platform will allow Hiscox to grow its Brazilian business, enabling it to talk directly to potential customers and better understand the local market.
It comes on the same day that the Chancellor met with leading members of the Brazilian insurance sector to discuss the key issues facing the industry at Lloyd’s Brazil’s Rio de Janeiro headquarters.
Since Lloyd’s became the first international reinsurer to receive authorisation to operate in Brazil following reforms to the market in 2008 it has grown into the second largest reinsurer in Brazil, with a market share of 12%.
Lloyd’s Brazil’s structure mirrors the unique market structure of Lloyd’s in London and, currently, ten managing agents have co-located ‘liaison offices’: ACE, ANV, Argo, Beazley, Catlin, Kiln, Liberty, Markel, Navigators, Starr and now Hiscox.
Lloyd’s has reaped the benefits of being onshore in Brazil. The ten managing agents with offices in Brazil have grown faster than those without – 112% average growth per year for those in Brazil compared with a Lloyd’s market overall average of 21% from 2008 to 2012.
The government published an insurance growth action plan in December 2013 to enhance the position of the UK insurance sector as a global leader and increase its contribution to economic growth. The action plan identified Brazil as a key target market for the growth of the UK insurance sector, and the government will develop a co-ordinated, targeted approach to promotional and other activity to help UK insurers grasp the available opportunities in Brazil.
£500,000 transformational funding for UK-Brazil youth group ‘Fight for Peace’ announced
Chancellor George Osborne has visited a celebrated UK run charity, the Fight for Peace Academy, in Rio de Janeiro where he announced the government would grant £500,000 to fund the completion of a purpose built “Fight for Peace Academy” in East London.
Founded in Rio by Briton Luke Dowdney MBE, Fight for Peace uses martial arts combined with education to help young people in communities that suffer from crime and violence. After its success of in Rio, the decision the project was replicated in Newham in 2007.
However their existing facility in London is running at capacity, with caps imposed on a number of sports sessions, waiting lists for education courses and even some young people being turned away.
The funding for the project will nearly double the site’s square footage, providing additional classroom space, multiple sports training areas and significantly increasing the number of young people they are able to work with.
The Chancellor’s visit to Rio follows a reception hosted for this London branch of the organisation at 11 Downing Street in November 2013.
In Rio he was shown the headquarters of the project as well as the activities offered following a short tour through the streets of the local Complexo da Maré community with children and young people from the project.
He also attended training sessions and presentations of boxing, capoeira, judo, taekwondo and jiu-jitsu and met pupils from Fight for Peace’s education classes.
In 2013 Fight for Peace supported 2,500 young people directly, and 90,000 young people indirectly, through its network of partners operating in 22 different countries around the world. By 2016, FFP will be working in 50 countries.
Launch of a regular Economic and Financial Dialogue
Following their meeting Tuesday afternoon the Finance Ministers of Brazil and the UK, Minister Guido Mantega and Chancellor George Osborne, announced the launch of a regular Economic and Financial Dialogue between their two countries.
The dialogue between one of the world’s major emerging markets and one of the world’s largest advanced economies will strengthen mutual cooperation and boost trade and investment.