UK Export Finance: Economic impacts of our support 2022-23
Published 28 June 2023
© Crown copyright 2023
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We estimate that the £6.5 billion of new loans, insurance and guarantees provided by UKEF in the 2022-23 financial year:
- Contributed up to £4.1 billion of UK Gross Value Added (GVA)
- Of which £2.6 billion went to workers as compensation of employees (wages) and £1.4 billion to businesses as gross operating surplus (profits)
- Supported up to 55,000 UK Full-Time Equivalent (FTE) jobs
- Of which 27,000 are estimated to be directly employed by UK businesses and a further 29,000 are jobs supported indirectly through the UK supply chain of UK businesses
1. Jobs supported modelling methodology
The methodology utilises GVA and FTE ‘effects’ multipliers contained in the input-output analytical tables produced by the Office for National Statistics (ONS).[footnote 1] These effects are an estimate of the amount of GVA and number of FTE jobs generated by, respectively, a £1 and £1million increase in final demand for the output of a UK industry. Similar input-output analysis methodology has been used by Export-Import Bank of the United States (US EXIM) and Department for Business & Trade to estimate the number of jobs supported by the US EXIM and by UK exports.
FTE effects show how many FTE jobs are required to produce £1 million of output in a given industry – i.e. the “jobs intensity” of production. If the manufacture of electrical equipment industry, for example, has an estimated FTE effect of 11 then for an increase in demand for that industry’s output of £1 million (for instance, due to an £1 million export contract won with UKEF’s financial support), 11 jobs will be required.
To produce the estimate of jobs supported by UKEF, we multiply the FTE effects by the value of UK output facilitated by our credit and insurance products (matched by industry sector and adjusted for price inflation to align with the relevant FTE effects publication date).
From the published FTE effects and simple multipliers, we can calculate both the ‘direct’ and ‘indirect’ FTE effects. In the above example, of the 11 extra jobs required by the manufacture of electrical equipment industry, some of those will be in the exporting firm itself and some will be in the exporter’s domestic supply chain. Direct FTE effects show the jobs used by the exporter themselves 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.
Similarly, the value of GVA supported by UKEF is estimated using the respective effects and applying them to the (nominal) value of the UK exports supported by UKEF in 2022-23. The ONS also publish effects multipliers for GVA’s components: compensation of employees and gross operating surplus (broadly, income accruing to employees and employers respectively), as well as taxes minus subsidies on production. This allows us to estimate the impact of UKEF on employees and employers (simplified as wages and profits).
The breakdown by UKEF products and accounts (business segments) given below is based on internal management information 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. This is because we do not observe what would have happened in a world without UKEF support and so describe our estimates as impacts that UKEF supported or contributed to.
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 the value generated by an entity. It is the value of goods and services produced over a period, minus the cost of all inputs and raw materials used in that production. For an individual firm or industry, it measures the value added to the economy from its activities. Adding GVA together across all firms or industries produces an aggregate value for the entire economy. It is therefore closely linked to Gross Domestic Product (GDP), which is GVA plus net taxes on products.
GVA can also be thought of as the sum of all incomes generated by UK resident individuals and firms in the production of goods and services. The value generated by a firm or industry flows to recipients as income (one person’s spending is another person’s income). This is therefore known as the ‘income’ measure of GVA, and it is comprised of compensation of employees, gross operating surplus & mixed income, and taxes less subsidies on production.
Compensation of employees is broadly analogous to employees’ incomes. It is the total benefits or renumeration received by employees, including wages, salaries and employers’ social contributions like pensions. It can be thought of as the share of economic value produced in a period that workers are entitled to.
Conversely, gross operating surplus and mixed income is broadly analogous to profits for businesses and the self-employed. It is the remaining share of economic value produced not going to paid employees or government.
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 | 2022-23 |
|---|---|
| Direct | 27,000 |
| Indirect | 29,000 |
| Total | 55,000 |
| By Account | |
| Account 2 (guarantees and insurance) | 43,000 |
| Account 3 (guarantees and insurance issued on written instructions of Ministers) | <1000 |
| Account 5 (direct lending) | 2,000 |
| Account 6 (Temporary Covid Risk Framework) | 11,000 |
| By Product | |
| Buyer credit guarantee | 11,000 |
| Insurance | 2,000 |
| Bond or export working capital support | 3,000 |
| Direct loan | 2,000 |
| General working capital | 37,000 |
*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 | 2022-23 |
|---|---|
| Direct | £2.2 billion |
| Indirect | £1.9 billion |
| Total | £4.1 billion |
| Compensation of employees (wages) | |
| Direct | £1.4 billion |
| Indirect | £1.2 billion |
| Total | £2.6 billion |
| Gross operating surplus and mixed income (profits) | |
| Direct | £0.8 billion |
| Indirect | £0.7 billion |
| Total | £1.4 billion |
| Taxes less subsidies on production | £0.1 billion |
*Figures may not sum due to rounding.
4. Key assumptions
The UK economic output values that are multiplied with the effects multipliers are based on our estimates of UK content associated with the contracts supported by UKEF though its credit and insurance products. This includes specific export contracts for UK goods and services supported by UKEF financing, as well as increases in domestic output arising from our non-contract specific support for UK businesses. UKEF’s general working capital products, for example, are not directly tied to an export contract.
We match the businesses supported by UKEF to the relevant effects multipliers using the industry sector defined by Standard Industrial Classification (SIC) codes. Where an exporter has multiple SIC codes, we use the average FTE or GVA effect across all relevant SIC codes.
The ONS input-output tables we have used for this analysis are estimated using 2018 data. Therefore, we assume that the historical relationships across industries for FTE jobs, GVA and output hold for 2022-23, while accounting for the effects of inflation to estimate the real effects on employment.
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 2022-23 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. In turn, our estimates are a forward-looking view of the economic impacts expected from UKEF’s credit and insurance products issued in a given financial year.
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). Furthermore, due to the nature of input-output tables and multipliers derived from them, we also assume that there is always capacity to meet the additional demand for UK output which is not created from displacement of economic activity from elsewhere.
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. we produce estimates of jobs supported, not created).
The ONS’s estimates of FTE and GVA effects are derived from historical relationships and based on industry averages, which may not be representative for individual UKEF-supported firms (for example, due to differences in labour intensity of production between exporting and non-exporting firms). The ONS effects are also based on a static observation of data at the time they were produced – FTE effects could actually 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.
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See UK input-output analytical tables, industry by industry and FTE multipliers and effects, reference year 2018 for examples of these tables. ↩