UK Export Finance Products and Services Jonathan Leonard South Tyneside Manufacturing Forum UK Export Finance 05/02/20131.

UK Export Finance Products and Services

Jonathan LeonardSouth Tyneside Manufacturing Forum

UK Export Finance 05/02/2013 1

What do we want you to get from today's event?

• An increased awareness of UK Export Finance.

• Better understanding of our products and services.

• How they can potentially help your business to grow.

• The role of the regional Export Finance Adviser.

• Understanding of the roles played by the banks and insurers.

• What the application process looks like.

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UK Export Finance

• Export and Investment Guarantees

Act 1991

• Trade Minister: Lord Green (same as

UKTI)

• HM Treasury “Consent” controls

activity

• Complement but not compete with

private market

• Export Credit Guarantees Department

• 2011 - rebrand

3UK Export Finance 05/11/2012

Why have we introduced Export Finance Advisers across the UK?

• To get our message out to a wider audience.

• To work more closely with all the key parties in the regions e.g. Banks, Brokers, Chambers etc.

• Shorten the lines of communication between London and the regions.

• To make it easier for UK businesses to export overseas and....

• Ultimately to help the UK economy.

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Business activity

• Deals done range from c.£10k to £2.3bn

• £19bn exposure

• c£3bn new business annually

• Services, as well as goods, e.g. consultancy

• Expanded remit to cover all sectors; not just capital and semi-capital goods and related services

• Foreign content up to 80%

• Unconditional AAA guaranteeUK Export Finance 05/11/2012 5

New short term products from the UK’s export credit agency

• Bond support scheme

• Export working capital scheme

• Short-term credit insurance (EXIP)

• Letter of credit guarantee scheme

UK Export Finance 05/11/2012 6

Contract Bond Support Scheme

• Where a participating bank issues a contract bond (or procures its issue by an overseas bank) for UK export contract, we normally guarantee 50% of the bond if our minimum risk standard is met

• Up to 80% for advance payment and progress payment bonds

• UK Export Finance’s credit risk is on the UK exporter; willing not to share a bank’s fixed and floating charges but only share in contract-related security

• Fourteen banks participating

UK Export Finance 05/11/2012 7

Export Working Capital scheme

• We provide guarantees to banks to cover the credit risks associated with export working capital facilities in respect of specific export contracts. UK Export Finance formally guarantees 50% of risk:

– useful where a UK exporter wins an overseas contract that is higher in value than is typical, or succeeds in winning more overseas contracts than it has done before

• Our credit risk is on UK exporter; willing not to share in bank’s fixed and floating charge, but only share in contract-related security

• Six banks participatingUK Export Finance 05/11/2012 8

Export insurance policy (EXIP)

• Insures exporter against risk of not being paid or of not being able to recover costs of performing export contract due to specified events

• All sectors and up to 95% cover

• Can be introduced by broker

• Not for EU / rich OECD markets below 2 year risk horizon

• Not whole turnover business

UK Export Finance 05/11/2012 9

Letter of credit guarantee

• Where a UK bank adds its confirmation to a letter of credit issued by an overseas bank for a UK export, we guarantee up to 90% of value of letter of credit

• Eight UK banks participating

• Limits in place for 305 banks in 38 markets

• Bank retains documentation risk

10UK Export Finance 05/11/2012

Main markets

• Venezuela

• Uruguay

• Malaysia

• Ghana

• Algeria

• Taiwan

• Brazil

• Turkey

• Iraq

• South Africa

• Saudi Arabia

• The Philippines

• Oman

• Libya

• Trinidad & Tobago

• Papua New Guinea

• Kazakhstan

• Pakistan

• Bahrain

• Sri Lanka

• UAE (Dubai / Abu Dhabi)

• Nigeria

• Indonesia

• Egypt

• Bangladesh

• Ukraine

• Russia

UK Export Finance 05/11/2012 11

Application Process For Bank Guarantee Products

• Please contact your regional Export Finance Adviser in the first instance who will be able to give you an early indication on whether your enquiry meets our initial criteria.

• Exporter and Bank then complete an application form and submit to UKEF along with:

– Last 3 years accounts

– Management accounts

– Business plan

– Cash flow & P&L forecasts

• UKEF undertake:

– Credit risk assessment

• UKEF provide a “commitment” to the bank and papers signed.

• Bank notifies UKEF when the bond is issued or finance drawn.

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Application Process For Export Insurance Product

• Please contact your regional Export Finance Adviser in the first instance who will be able to give you an early indication on whether your enquiry meets our initial criteria.

• You can either apply direct using the application form on our website, or through your broker.

• If you are unsure of, or doubt the creditworthiness of your overseas buyer, you can ask UKEF to look at them on your behalf with a view to assessing their standing.

• UKEF will consider your application and if approved, will issue an offer letter and policy.

• Once the exporter has signed the policy, paid any premium required and we have countersigned the policy, cover is then in place.

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Case Study – Pinnacle Re-Tec Ltd

UK Export Finance 27/03/2012 14

• Regularly need to provide advance payment guarantees / bonds

• Previously, HSBC asked for ‘cash cover’ for 50% of the bond value

• Whilst pleased their bank supported them, tying the cash up for the period of the bond impacted cash flow

• Recently won contract worth in excess of £700k where an advance payment guarantee and performance bond was required

• UK Export Finance provided the bank with a guarantee for 80% of the APG and 50% of the performance bond

• No ‘cash cover’ was needed

How to Apply

• Credit Insurance – UK Export Finance directly; or

– Insurance broker

• Finance Guarantees– Bond Support, Working Capital Support, Foreign Exchange

Credit Support, Letter of Credit Guarantee - speak to your bank

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www.ukexportfinance.gov.uk 07818 570615

[email protected]