HM Treasury
Chancellor uses trade trip to Brazil to hail further finance support to back British exporters
At the start of a three day trade trip to Brazil, the Chancellor of the Exchequer, the Rt Hon George Osborne MP, announced the next stage in the governments fundamental overhaul of finance for British exporters.
The Budget announced expansion of public-sector direct lending; today the Bank of England announced plans to support expansion of private sector lending for exporters. These measures will move the UK to the top of the global league for export support.
In a speech to business leaders in Rio de Janeiro, the Chancellor:
- announced, following discussions with the Governor, a significant step to increase availability and cut the cost of private-sector lending for exporters, and welcomed the Bank of England giving finance guaranteed by UK Export Finance (UKEF) access to its Sterling Monetary Framework facility, to help make such lending less risky
- confirmed a doubling in size of the UKEF direct publicly-financed lending facility for exporters to 3 billion and the cutting of its interest rates by a third
Taken together these measures for private and public export finance, which have been welcomed by key British exporters, will help achieve the governments aim to give the UK the most competitive export finance in Europe and put it on a par with the United States.
In 2012 to 2013 UK Export Finance provided loan guarantees worth over 2 billion in total. Todays new announcement could help reduce the cost of private-sector export finance loans by 5 to 10 basis points.
Following the Budget, the British Exporters Association (BExA) revised its rankings to show that the UK now has some of the most competitive support for export finance.
The Chancellor also announced:
- UK Trade and Investment (UKTI) will invest 4 million a year to triple the number of mid-size business advisors to support the export ambitions of 3000 companies, as part of its new strategy
- UKTI will invest a further 2 million a year to increase its presence in Latin America to mirror the successful expansion strategy it has pursued in China
The Chancellor announced that part of this additional investment in Latin America will be focused on ensuring a lasting infrastructure investment legacy from the partnership between Britain and Brazil as consecutive hosts of the Olympic Games.
The Chancellor said UKTI will focus on backing British businesses seeking to secure contracts in over 1.5 billion of infrastructure projects around Brazil.
This will build on the 1 billion worth of contracts UKTI has helped British companies secure in Brazil in 2013 to 2014.
The Chancellor is meeting with a range of British companies exporting to and expanding in Brazil. During his visit:
- Rolls Royce is announcing a commitment to build a 22 million marine facility in Rio de Janeiro
- Lloyds announce that Hiscox decision to join their Brazil reinsurance platform will boost the amount of business it does in Brazil
The Chancellors started his trip in Rio de Janeiro with his keynote speech followed by visits to Rolls Royce, Lloyds of London, and GE Wellstream.
He then travels to Sao Paulo where he will meet with his Brazilian counterpart, Guido Mantega, and the Governor of the Central Bank of Brazil, Alexandre Tombini.
He will finish his trip to Brazil on Wednesday with a visit to the Brazilian Stock Exchange and meetings with the finance and asset management industry.
The Commercial Secretary, Lord Deighton, who played a leading role in delivering the London Olympics accompanys the Chancellor on the trip.
Over the last decade the Brazilian Economy has tripled in size, and now ranks as the seventh largest in the world.
UK trade with Brazil has increased by over fifty per cent in the last four years but still accounts for less than one per cent of total UK exports.
In his speech the Chancellor said:
For decades we have not been exporting enough - not just to Brazil, but to all the fastest growing markets in the world.
So I am confronting that historic weakness head-on.
In my Budget last month I fundamentally reformed our export regime.
I cut the tax on flights to emerging markets, including Brazil, so that you dont pay more to fly to Rio or So Paulo, or indeed Beijing, than Washington or New York.
And I massively extended the financial support we give to our exporters.
I am doubling the amount of government lending for exports and cutting the interest rates on that lending, by a third.
I am clear: Britain will no longer have some of the least competitive export finance in Europe. We are going to have the most competitive export finance in Europe.
But the job is never done and so today I can announce further reforms.
Where Budget boosted government lending - today we will boost private lending too.
Banks will now have access to a special Bank of England facility that will make it much less risky for them to extend loans to our exporters.
That should mean billions of extra lending will be made available to our exporters.
And it will mean cheaper lending - saving potentially millions of pounds for large projects.
Thats how we make British exporters competitive.
Read the Chancellors speech on Britain and Brazil as partners in full.
The Chancellors trip comes during the governments Export Week in which over 70 nationwide events are taking place to encourage small and medium sized businesses to export.
Speaking about the increased investment for UKTI, Lord Livingston, Minister for Trade and Investment, said:
Mid-sized businesses have the potential to be economic powerhouses for the UK economy, creating jobs and growth for all regions of the UK.
Exporting helps companies grow and increasing support for small and medium-sized companies is a vital part of the governments long-term economic plan to create jobs and reduce the deficit.
Research shows that exporters do better with UKTIs help and this new money will allow us to offer every mid-sized business a relationship manager who can provide tailored trade advice and an intensive programme of support to help them break into new markets. I encourage any company with global ambitions to contact UKTI.
Mike Rees, deputy group chief executive of Standard Chartered Bank, said:
Stimulating trade is fundamental to the health of the global economy and from a UK perspective, a vibrant export market lies at the heart of sustaining strong economic growth.
The government has made clear its ambition to double UK exports by 2020 and this move gives banks an increased level of comfort for lending which is guaranteed by UKEF. It will enable the banking sector to better support UK businesses who are already exporting or who wish to start doing so.
Alan Keir, chief executive HSBC Bank plc added:
HSBC welcomes the changes announced today by the Chancellor and Bank of England that will provide further support to British exporters.
By giving finance guaranteed by UK Export Finance (UKEF) access to the Bank of Englands Sterling Monetary Framework facility exporters are assured of more sustainable and affordable funding even in times of stress.
Mark Elborne, GE president & CEO, UK & Ireland also added::
We welcome the recent announcements by the UK government which mark a significant shift in support for British exporters.
In 2013 GE committed 16.3 million and 11.2 million to R&D expenditure, creating in excess of 122 new jobs and safeguarding 88 existing jobs at Wellstream in Newcastle.
We welcome the Chancellors further commitments to support UK manufacturers and exporters and as a result of the overhaul of UK Export Finance we now expect to use its facilities to support future exports to Brazil
Nigel Taylor, senior vice-president at Airbus, said:
Airbus, as a major UK exporter and many of whose customers benefit from UKEF support, welcomes this initiative which should make UKEF guaranteed paper more liquid and therefore contribute to reducing the overall pricing of export credit.
22 million Rolls-Royce Marine facility to be built in Rio de Janeiro
The Chancellor announced on Monday that Rolls-Royce is to build a new Marine facility in Duque de Caxias, Rio de Janeiro.
The new facility, which will provide testing and assembling of thrusters and engines to equip Petrobras drillships helps Rolls-Royce further expan