Corporate report

UK Export Finance Performance Highlights: 2014 to 2015

Published 29 June 2015

We are the UK’s export credit agency. We help UK exporters by providing insurance to exporters and guarantees to banks to share the risks of providing export finance. In addition, we can make loans to overseas buyers of goods and services from the UK.

UK Export Finance is the operating name of the Export Credits Guarantee Department (ECGD), a ministerial department.

1. Key facts about UK Export Finance

UKEF describes its market segments as:

• small international high flyers
• international outlook
• international high flyers
• bigger modest exporters
• bigger, ambitious exporters
• large corporates

The majority of companies benefiting from our support in the UK are small- and medium-size companies.

Our support benefits not just the exporter but its suppliers too: over 6,000 companies indirectly benefited from UKEF’s support in 2014-15.

We work in partnership with over 70 banks, brokers and other providers to supply export finance and insurance that complements their commercial business.

In 2014-15 we provided £2.7 billion of support for exports to 72 countries.

In the last five years we’ve provided £14 billion of support for UK exports.

In total we manage nearly £20 billion of financial risks - taking on this risk helps UK companies conduct business in emerging markets and protects trade during times of market disruption.

As the world’s first official export credit agency we’ve been supporting UK exports for nearly 100 years.

We aim to operate at no net cost to the taxpayer over time by charging a premium for each case we support.

Where possible we provide support in markets where private sector finance or insurance is unavailable - recent examples include Libya, Iraq, Greece, Ukraine and Russia.

2. Chief Executive’s report

David Godfrey, UK Export Finance

Early in 2014 we set out an ambitious three-year plan to develop the support we are able to provide for exports through the economic cycle. At the end of the first year of the plan, I am pleased to report we are on track.

We exist to support exports by assuming financial risks that cannot be assumed by private sector banks or insurers. As part of HM Government, we seek to provide this support at no long-term cost to the taxpayer.

Our figures show strong continued support for UK exports, we have considerably expanded our capabilities and we are comfortably meeting the financial objectives set for us by HM Treasury. To continue to do this well we must be an agile, competitive and responsive export credit agency (ECA), able to support UK trade as and when required.

We have demonstrated all these traits in achieving several firsts in 2014-15:

• our first direct lending to an overseas buyer of UK goods or services
• becoming the first ECA to offer Islamic finance by guaranteeing a sukuk bond used to raise finance for aircraft. This was also the largest capital markets offering for aviation to carry an ECA guarantee an agreement to support loans made in offshore Renminbi to support exports to China
• the first refinancing back-stop scheme – the Export Refinancing Facility – designed to anticipate future market conditions that could jeopardise the financing of large capital projects

And we were voted Export Credit Agency of the Year by the readers of Global Trade Finance. We can now look forward to more progress, invention and innovations as we implement the remaining years of our business plan.

3. Case studies

Innovative support

New gold standard for sharia-compliant finance

3.1 World first in Islamic financing

Emirates wanted to use Islamic finance to fund its purchase of four new Airbus A380s for its fleet, so UKEF developed an innovative guarantee for a sharia-compliant sukuk (Islamic bond) in the debt capital markets.

The case has been hailed as a new gold standard for sharia-compliant asset finance, which has widened the options for buyers of UK exports and boosted the UK’s aspiration to become the leading Western hub for Islamic finance.

3.2 Historic direct loan

UK Export Finance’s new direct lending facility, offered in partnership with a bank, helped Wolverhampton-based construction multinational Carillion to win a major new £75 million construction contract in Dubai. This is the first direct loan facility in UKEF’s near 100-year history, and its availability gives UK exporters like Carillion confidence when discussing finance with overseas buyers.

It is another way UK exporters can differentiate themselves from the international competition, and in Carillion’s case has helped the firm realise its objective of growth in a key Middle East market.

Award winning

• Deal of the year - NMS International Group
• 2014 Queen’s Award for Enterprise - JDR Cables
• GTR readers’ export credit agency of the year - UK Export Finance

3.3 Helping export growth

JDR Cables is a Cambridgeshire-headquartered mid-sized business supplying sub-sea power cables and control umbilicals to the energy sector. When it required additional support to help manage the risks of offering contract bonds for a contract to supply an offshore wind farm in Germany, UKEF guaranteed JDR’s bank the sums owed if the contact bond was called.

This enabled JDR to fulfil an important contract and continue to grow its business, and the company has since received a 2014 Queen’s Award for Enterprise in International Trade.

3.4 Taskforce of smaller companies

NMS International Group, from Leicestershire, is leading a consortium of some 50 UK-based small and medium-sized enterprises (SMEs) to build seven district hospitals in Ghana. The firm won a US$175 million (£134.1m) contract to design, build and equip the hospitals thanks to a bank loan to the Ghanaian Ministry of Health supported by UKEF. NMS has now established itself as a leading provider of social infrastructure projects in Ghana.

The hospitals project is on schedule and won deal of the year awards from respected publications Global Trade Review, Trade Finance and The Banker.

Guiding smaller exporters

• 24 UKEF export finance advisers on hand to help smaller exporters
• 95% cover available under a UKEF export insurance policy

3.5 Responsive to demand

The security situation in Ukraine meant Nottinghamshire-based Legume Technology was unable to find an insurer willing to cover its payment risks for growing sales of its specialist non-chemical fertilisers. With up to 30 percent of its sales to Ukraine, this represented a big risk for a small company.

The firm approached UKEF and we were rapidly able to issue an export insurance policy covering the non-payment risk on fertiliser exports to the company’s main Ukrainian distributor. This has helped the company continue its strong export growth.

3.6 Impartial guidance

For Northern Ireland-based small business Environmental Marketing Solutions a new contract to export equipment to Israel posed a challenge to manage payment risks. UKEF was able to provide information and advice to help it access support from the private sector, without using a UKEF guarantee or insurance policy – support we describe as a ‘private market assist’.

Help from Elizabeth McCrory, one of UKEF’s national network of 24 export finance advisers, meant the company was able to arrange a confirmed Letter of Credit from the buyer’s bank and establish a strong arrangement with a new buyer.

4. Business highlights

Number of companies support	Number of companies supported	Private market assist[footnote 1]
2009-10	10	0
2010-11	18	0
2011-12	33	0
2012-13	84	0
2013-14	130	0
2014-15	160	66	226

Business supported	Business supported
2009-10	£2,206 million
2010-11	£2,924 million
2011-12	£2,318 million
2012-13	£4,295 million
2013-14	£2,272 million
2014-15	£2,730 million

Number of facilities issued	Number of facilities issued
2009-10	198
2010-11	192
2011-12	204
2012-13	368
2013-14	619
2014-15	588

Premium	Premium
2009-10	£58 million
2010-11	£96 million
2011-12	£85 million
2012-13	£133 million
2013-14	£120 million
2014-15	£104 million

Business supported by product type	Buyer and supplier credit financing	Direct lending	Export or Bond Insurance	Bond support or export working capital	Total
Business supported by product type	91	2	2	5	%

Number of companies supported by product type	Buyer and supplier credit financing	Direct lending	Export or Bond Insurance	Bond support or export working capital	Total
Number of companies supported by product type	12	1	29	58	%

5. Agile and adaptable support through challenging times

UKEF provides support through economic cycles and market disruptions. Our role is to step in when the market needs us to help protect export business from market disruptions that are likely to smooth out over time.

5.1 Civil aerospace and 9/11

Following the 9/11 terrorist attacks in the US we took possession of, leased and eventually sold 44 aircraft, ensuring losses both to the airline industry and UK taxpayer were minimised during this difficult period.

The graph below shows the annual totals of aircraft in UKEF’s possession since 2000. UKEF sold the last of the aircraft recovered following 9/11 in 2014.

Aircraft	Number of aircraft
2000	3
2001	42
2002	44
2003	43
2004	34
2005	17
2006	6
2007	5
2008	1
2009	1
2010	1
2011	1
2012	1
2013	1
2014	0

5.2 Impact of the 2007-08 financial crisis

Lehman Brothers collapsed in September 2007. As the graph below illustrates:

• UKEF support for aircraft exports peaked in 2010 to 2012 as UKEF helped sustain planned deliveries.
• civil project business took more time to be reflected in UKEF support due to projects taking longer to come to fruition.
• UKEF had to rebuild its support for short-term business, as this had been privatised in 1991. This move will help us provide an agile and swift response in the event of future market disruption.

Key	Aerospace (95% Airbus)	Civil	Short-term business (export contract values)
2003-04	697	1,137	0
2004-05	624	605	0
2005-06	1,026	682	0
2006-07	521	521	0
2007-08	549	238	0
2008-09	1,066	380	0
2009-10	1,977	213	0
2010-11	1,784	1,023	0
2011-12	1,831	487	80
2012-13	1,847	430	492
2013-14	954	1,318	367
2014-15	965	1,763	1,371

6. Spotlight on supply chains

6.1 The power of 27: indirect support for the UK export supply chain

Last year, we supported 226 companies. But many more UK firms in exporters’ supply chains benefited indirectly from this support. While the number of firms in each export supply chain varies hugely from 0 (in a few cases) to 3,000+ (for Rolls-Royce), we estimate there are over 6,000 firms in the UK supply chains of the companies we supported last year, or about 27 times as many UK firms as we support directly. The true figure is likely to be higher, as there will sometimes be third, fourth and lower tiers of suppliers.

6.2 The SME innovator: passing on half the value

High Wycombe-based firm Kiln Flame designs burners for rotary kilns. It has received UKEF support for performance bonds requested by customers in Europe, and recently passed on significant benefit to another UK SME. Kiln Flame’s Finance Director Paul Ryan said:

Our biggest UKEF-supported project was for a customer in the pulp and paper industry in Finland, to design a kiln burning lignin, a waste product from tree bark. The contract was worth more than £2 million of which we spent about half on a special fuel feeder system from a firm based in Yorkshire.

6.3 Aerospace supply chain: a cast of thousands

Our major aerospace customers Airbus and Rolls-Royce feature some of the UK’s biggest supply chains. In 2014, Airbus spent more than £2 billion with more than 900 companies across the UK. Rolls-Royce buys goods and services from about 3,000 UK companies, and about 80 percent of Airbus and Rolls-Royce suppliers are SMEs or smaller.

In the calendar year 2013, we estimate that roughly one-quarter by value of UKEF-supported work (£340m) was passed down our aerospace customers’ UK supply chains.

7. Our reputation

7.1 What people say about us

At the start of our three-year plan, we asked exporters for their views, to help us identify areas of potential improvement:

The thought leader among European ECAs

Munawar Noorani, Managing Director, Citi

The reinvigoration of UK Export Finance has been the best thing the Government has done as far as constructive help for exporters is concerned.

Lesley Batchelor OBE, Director General, The Institute of Export

UKEF is creating structures that go beyond what the British financial services sector can deliver.

Simon Moore, International Director, Confederation of British Industry

8. Our future

8.1 We will continue to pursue our aim to be an export credit agency which has the following qualities:

Agile and adaptable

• We will be an agile department, able to address the challenges to UK exporters throughout the economic cycle.
• We will act decisively and effectively as the economic climate changes, maximising the potential of our range of products and services.

Competitive offering

• We will strive to ensure we continue to offer a full range of the financing tools offered by comparable ECAs.

Customer delivery and awareness

• We will provide a quality of service to our customers that is flexible and efficient with a focus on solutions and innovation.
• We will continue to increase awareness of our products and services among exporters, overseas buyers, banks, brokers and other intermediaries.

Our organisation

• Will be a great place to work, where teams collaborate strongly across functions and to meet common goals.
• Our people will be experienced and skilled and we will develop their talents.
• Our leaders will be role models and create the environment for success and learning.

Media enquiries: Andy Aston, Head of News and Corporate Communications

Email Andy.Aston@ukexportfinance.gov.uk

Mobile +44 (0)7458 047053

New business enquiries

Email customer.service@ukexportfinance.gov.uk

1. Indicates support from a UKEF export finance adviser that made a material contribution to an export receiving support from the private sector. ↩