Research and analysis

UK Export Finance: Economic impacts of our support in the financial year 2023 to 2024

Published 30 July 2024

We estimate that £8.8 billion of new loans, insurance, and guarantees provided by UKEF in the 2023-24 financial year has:

• Supported the contribution of up to £3.3 billion of UK Gross Domestic Product (GDP).
• Supported up to 41,000 UK Full-Time Equivalent (FTE) jobs.
• Of these jobs, 20,000 are estimated to be directly employed in the industry sectors of UK exporters backed by UKEF, and a further 21,000 FTE jobs are indirectly supported through the domestic supply chains of those exporters.

1. Jobs/GDP supported modelling methodology

The methodology utilises GDP and FTE ‘effects’ multipliers derived from the input-output (IO) analytical tables produced by the Office for National Statistics (ONS) ^{[footnote 1] [footnote 2]}. These effects estimate the GDP and FTE intensity associated with additional demand for the output of each UK industry. GDP effects estimate the amount of GDP generated by a £1 increase in final use for a given industry. FTE effects estimate the number of FTE jobs required to produce a £1 million increase in final use (also known as final demand) for a given industry. To produce the estimate of GDP and FTE jobs supported by UKEF, we multiply the value of domestic output facilitated by our loans, guarantees, and insurance products by the respective effects of the matched industry sector. Similar input-output analysis methodology has been used by Export-Import Bank of the United States (US EXIM) and the UK Department for Business and Trade to estimate the number of jobs supported by the US EXIM and by UK exports.

Previously, UKEF reported on Gross Value Added (GVA) supported, however for 2023-24 we are reporting on GDP supported to make our estimates more accessible and comparable. GDP is equivalent to GVA plus taxes less subsidies on products ^{[footnote 3]}.

UKEF uses the ONS’ IO analytical tables to compute GDP effects by summing the effects for GVA and taxes less subsidies on products. To produce the estimate of the contribution to GDP, we multiply the GDP effect by the (nominal) value of domestic output associated with UKEF support. For example, if the manufacture of air and spacecraft industry has a GDP effect of 0.7, then an increase in demand for that industry’s output of £1 million (for instance, due to a £1 million export contract won with UKEF’s financial support) will contribute £700,000 of GDP to the UK economy.

Similarly, 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. For example, if the manufacture of electrical equipment industry has an estimated FTE effect of 11, then 11 FTE jobs will be required to produce £1 million of output (in real terms) for final use.

From the effects and multipliers published in the input-output analytical tables, we can calculate both the ‘direct’ and ‘indirect’ FTE effects. In the above example, some of the 11 extra jobs required by the manufacture of electrical equipment industry will be in the exporting firm itself, and some will be in the exporter’s domestic supply chain. Direct FTE effects would show the proportion of those 11 jobs that were required in the industry of the exporter, whereas indirect FTE effects would show the proportion of those 11 jobs required within the UK supply chain of the exporter, in order to facilitate the production of those goods and services. The breakdown of impacts by UKEF products and accounts is given in table 2.1 and is based on internal management information for each business supported by UKEF. Full definitions of UKEF products and accounts can be found in the Annual Report and Accounts.

In summary, estimates of FTE jobs and GDP supported depend on:

• The total value of the contracts or loans supported by UKEF.
• The share of contracts or loans expected to be spent on UK goods and services – equivalent to the increase in the final use for UK output.
• The jobs/GDP intensity (“effects”) of the industries of the businesses that UKEF supports.

2. Results

2.1 Table: Estimates of FTE jobs and GDP supported by UKEF in 2023 to 2024

	FTE jobs supported	GDP supported
Direct	20,000	£1.7 billion
Indirect	21,000	£1.6 billion
Total	41,000	£3.3 billion
FTE jobs and GDP supported by Account
Account 2 (guarantees and insurance)	34,000	£2.8 billion
Account 3 (guarantees and insurance issued on written instructions of Ministers)	2,000	£0.2 billion
Account 5 (direct lending)	5,000	£0.4 billion
Account 6 (Temporary COVID Risk Framework)	< 1,000	< £0.1 billion
FTE jobs and GDP supported by Product
Buyer credit guarantee	15,000	£1.2 billion
Insurance	< 1,000	£0.1 billion
Bond or export working capital support	< 1,000	< £0.1 billion
Direct loan	5,000	£0.4 billion
General working capital	20,000	£1.7 billion

Note: Figures may not sum due to rounding (nearest 1,000 for FTE jobs and £0.1 billion for GDP)

3. Changes to the methodology since last year

Since last year’s publication on UKEF’s economic impacts, we have continued to improve our methodology for estimating the increase in final use for the aerospace business segments to more closely reflect the value of economic activity that takes place within the UK. Another improvement relates to how we estimate the domestic output associated with standby loan facilities provided through our Export Development Guarantee product. This is discussed in ‘Key Assumptions’ below. Overall refinements to the methodology have reduced our upper bound impact estimates by approximately 25%.

We continue to review and revise our assumptions to ensure the robustness of our estimates. To this end, in early 2024, UKEF commissioned an external review of our methodology with input-output modelling experts from the University of Strathclyde’s Fraser of Allander Institute. The external review concluded that UKEF’s assumptions largely conform to industry standards and provided recommendations to strengthen our assumptions and estimates.

4. Key Assumptions

4.1 Approximating UKEF’s support for domestic output

To generate estimates of economic impact, UKEF approximates the amount of domestic output associated with the export contracts it supports through its credit and insurance products – otherwise known as UK content. These UK content values are multiplied by the relevant industry effects, based on the sector of the UK exporter, to estimate FTE jobs and GDP supported.

Some UKEF support is not tied to an export contract. Our Export Development Guarantee and General Export Facility products are used to support non-contract specific working capital loans. Typically, we approximate the amount of domestic output associated with these working capital loans by assuming that the entire loan value is spent within the industry sector of the UKEF-supported business, thereby generating domestic output for final use.

However, UKEF has refinanced two standby loan facilities in 2023-24 which were initially issued in 2020-21 and 2021-22, respectively, during the COVID-19 pandemic under the Temporary COVID-19 Risk Framework (TCRF). The nature of a standby loan facility means it may or may not be drawn. Given the circumstances generated by the COVID-19 pandemic, we took the aforementioned assumption, approximating domestic output as the entire loan value, as appropriate when these facilities were initially issued. This reflects the expectation that our backing supported the continued operation of these businesses through uncertain and rocky economic and financial conditions. Economic conditions have since improved and UKEF no longer operates the TCRF. Therefore, we have adjusted our assumption of the impacts associated with these standby loan facilities to reflect the reduced likelihood of the loans being drawn down in the future.

4.2 Allocation of industry sectors

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 GDP effect across all relevant SIC codes. Where the export contract has multiple exporters, we allocate the effects based on the share of the contract expected to be fulfilled by each exporter.

4.3 Input-output industry relationships

The ONS input-output (IO) tables are released with a lag, which means the latest release covers 2020. Due to the impact of COVID-19 on the economy in 2020, we have decided to use the 2019 IO tables for this year’s analysis. Due to the time lag on IO publications, we assume that the historical relationships that the 2019 IO table captures across industries for FTE jobs, GDP and output hold for the 2023-24 financial year. Furthermore, when estimating the impact on employment, we account for the effects of inflation by using the GDP deflator to estimate the real value of domestic output.

Due to the nature of IO tables and multipliers derived from them, there is an implicit assumption that there is always capacity in the economy 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. In other words, our estimates represent jobs supported, not created.

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. These impacts are expected to materialise over the coming years as the UKEF supported loans and contracts are utilised to purchase UK goods and services over time.

GDP and FTE jobs supported figures are based on expectations of UK content and domestic output at the time of business issuance within the financial year, rather than estimates of the increases in final demand associated with UKEF support during the financial year. As a result, our estimates are subject to uncertainty as the actual value of domestic output that UKEF backs may vary from the estimates that we have at the time of issuing our support. For instance, some loans may be pre-paid or not fully drawn down. Relatedly, as we do not know the exact timing of exports in the future, we cannot discount or deflate the value of future exports – we assume that they occur within the financial year. Therefore, we use the language “up to” when describing our impacts.

ONS estimates of FTE and GDP 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 productivity 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 change as a result of exporting, as firms adapt their methods of production to new markets.

Use of FTE jobs 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 part-time jobs, or one job spread among several part-time workers.

Our estimates are in terms of job-years which is the total years of FTE employment supported by UKEF. In other words, 41,000 FTE jobs supported represents an estimate of the aggregate number of FTE jobs that are supported over multiple years. For instance, 3 FTE jobs supported could represent either i) 3 FTEs employed over a single year, or ii) 1 FTE employed over 3 years. We can only provide this aggregate job-year estimate rather than the estimate of jobs supported per year.

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.

6. Definitions

Supported

Through this methodology, UKEF is not implying that the jobs or GDP it supports are newly created or would not have otherwise happened without UKEF involvement. This is because we do not observe what would have happened were UKEF support unavailable for UK exporters. Therefore, we describe our impacts as having ‘supported’ and ‘supported the contribution of’ FTE jobs and GDP, respectively.

Full-Time Equivalent (FTE) jobs

Jobs supported are measured in terms of FTEs – which standardises hours worked each week – to account for different working patterns of employees. For example: if the contracted hours for a full-time employee is 40 hours, a part-time employee working 20 hours a week may only count as 0.5 FTE. This means when UKEF says it has supported ‘X’ FTE jobs, these jobs are not equivalent to ‘headcount’ (number of people).

Gross Domestic Product (GDP)

The contribution to the UK economy is measured by GDP which is equivalent to Gross Value Added (GVA) plus net taxes on products. Net taxes on products (i.e. taxes minus subsidies) captures the value of taxes and subsidies paid on the production or purchase of goods and services. GVA is equivalent to the value of goods and services produced over a period, minus the cost of all inputs and raw materials used in that production. For example, a baker generates value through producing bread, but requires flour from a miller, who requires wheat from a farmer. Therefore, the value added for the baker is the income generated from selling bread, minus the cost of the flour, whilst the value added for the miller is the income generated through selling flour, minus the cost of the wheat. GVA therefore includes the sum of all incomes generated by UK resident individuals or firms in the production of goods and services. Aggregating this for all industries in the UK and adjusting for net taxes on products equates to GDP ^{[footnote 4]}.

Real versus Nominal

Real values reflect a constant price level, so that changes in prices (inflation) that affect the value are stripped out. This allows for a direct comparison of the values across time, ignoring the effects of price changes. On the other hand, nominal values represent the current price level, so changes in the value will incorporate the effect of inflation ^{[footnote 5]}.

1. UK input‐output analytical tables: industry by industry ↩

2. FTE multipliers and effects, reference year 2019 ↩

3. A guide to interpreting monthly gross domestic product ↩

4. What is GDP? ↩

5. Deflators and how we use them in economic estimates ↩