Parliament has debated plans to expand the capacity of UK Export Finance (UKEF), with MPs from across the House backing support for exporters while differing sharply on the role of subsidies, Brexit and regional priorities.
Speaking for the Conservatives, Dame Harriett Baldwin said her party supports updating legislation dating back to 1982 and 1991 to ensure government has the tools to back British exporters. She argued that UK firms have repeatedly shown they can compete internationally “with the right conditions” and said modernising the framework would help sustain that success.
Baldwin pointed to recent UKEF-backed deals as evidence of global demand for British engineering, aerospace and defence. She cited guarantees including “£165 million for supplying Ethiopian Airlines, £102 million for Avolon in Ireland and £66 million for Emirates in Dubai”, alongside defence exports where “BAE Systems and MBDA [have been] receiving over £120 million per major contract,” including support for air defence systems in Poland.
She stressed, however, that UKEF should remain a backstop rather than a substitute for private finance. “UK export finance should be deployed only when no private sector solution is available,” Baldwin said, adding that Conservatives do not support increased taxpayer subsidy until issues such as “energy prices, tax and regulation” are addressed. She also raised questions on regional balance, SME access, sanctions enforcement and the role of embassies in supporting exports.
Responding for Labour, Ben Coleman welcomed the Bill as part of the government’s wider trade agenda, saying it would “expand and clarify the spending limit for UK Export Finance.” He described UKEF as having “a very proud history of boosting British exports, and supporting thousands of companies and tens of thousands of British jobs.”
Coleman drew on his experience as trade envoy to Morocco and francophone west Africa, highlighting recent engagement in Togo and neighbouring states. He said UKEF played “an absolutely brilliant job” in co-organising a regional trade forum, promoting what he described as a UK approach based on “co-production rather than extraction.”
He also argued that UKEF has a role to play closer to home, particularly in rebuilding trade with the EU. Coleman described Brexit as “an absolute disaster” for trade, claiming that “more than 16,000 SMEs have given up trading with the EU.” He welcomed the government’s efforts to reset relations with Brussels and called for further steps, including mutual recognition of conformity assessments and professional qualifications.
Deregulate.
That only takes you so far and can have unintended consequences.. the best system is a low regulation system ( the right ones) with easy government back finance.. because investment is the key and the best way to get investment stimulated is with government backed finance.
Deregulation is not a bonfire. Low regulation can, in fact, only now be achieved in Britain by deregulation, so beset with thickets of stupidity are we. But I agree. ‘Light touch’ regulation is the way to go.
Regarding ‘government backed finance’, certainly in this country, it is littered with ‘White Elephants’ expensively funded by the long suffering and now, quite rightly, extremely angry taxpayer.
For an example of exactly how expensive ‘government backed finance’ is, we only need a quick glance at the history of ‘PFI’
‘The new government’s only legislation on the NHS in 1997 was another short Bill to facilitate PFI. The National Health Service (Private Finance) Act was pushed through with just one amendment allowed, and with one aim in mind – to “remove any element of doubt” among the bankers that, despite all the tough-sounding rhetoric insisting that PFI contracts transferred risk to the private sector – there was no real risk at all, and their money was safe.’
Private firms raise finance from debt and equity investors and pay interest rates higher than the government would for public borrowing.
So, in theory, the state should borrow at low rates and fund everything really cheaply?
There is a catch, not sure which number…let’s say 12
We know from ‘Concorde’ that ‘The State’ is rubbish at picking winners.
So ‘The State’ can back private projects so private companies can borrow more cheaply…?
Catch 12 ‘The State’ is rubbish at picking winners:
‘Given an original estimate of £160 million, the project soon blew way over its budget – by 1975, the year before Concorde took off, more than £1.2 billion (£11 billion today) had been spent’
‘The National Audit Office has been unable to conclude that the Ministry of Defence has achieved value for money from the procurement phase of its £10.5 billion private finance deal for the Future Strategic Tanker Aircraft (FSTA)’
‘Defence Eye cannot begin to think of the number of MoD staffers who will recount their horror stories about Private Finance Initiative (PFI) deals signed in the very late-1990s and 2000s. Inflexible contracts, recalcitrant contractors who were minting it, while providing substandard service that still met the contract, you name it……The only question now is how the government can package the return to PFI – as stated above, a new name is going to have to be found…’
Beware Catch 12.
Deregulation to achieve light touch regulation, removing, as far as possible, the dead hand of government from (particularly defence export) business is the best way forward.
Beware, also, Catch 13: ‘I’m from the government and I’m here to (provide everything short of real) help’
A few things, PFI was very different in that it was essentially the state borrowing in a way that hide state borrowing, but made that borrowing vastly more expensive.. essentially the government refusing to capitalise its own services and getting private investors to do at a massive profit.. essentially the reverse of government backed borrowing.
I very much agree with you on these large projects, but again this was more national pride type projects over sensible economics.. decent government backed borrowing is more about supporting where there is already a seed of a market that further investment can secure.. so where a company is looking to build a European factory.. providing extra finance that makes it an easy decision where that factory is going.. a government backed borrowing to proven small and medium sized businesses so they can more easily recapitalise and expand with opportunities… most definitely not a way to piss billions at single projects. One way you could do this is to work in partnership with a Uk banks with a proven track record in providing investment to businesses, so essentially the government shares the risk with proven banks using the banks as the vehicle to get the government backed loans out to the small and medium sized businesses as well as the international business wanting to invest in the Uk.
Very much agree. Of course, various government backed finance for SME schemes already exist.
My concern is that, in the export market, overseas companies operate within a much more relaxed regulatory environment than do our own.
Until that is sorted out, British defence exports will continue to be dominated by government to government transactions mainly benefitting the massive para-statal companies who then assert themselves within those contracts to the detriment of SMEs forced into uncongenial terms of business.
And I think the very easy win on this one is regulations on drones.. that is an easy win.. making a drone friendly sea and land zone.
Definitely…and get Cranfield University airfield set up as a government backed Drone test and evaluation centre.