Export and Investment Guarantees

Judith Cummins Excerpts

Wednesday 13th November 2024 Commons Chamber

[Madam Deputy Speaker (Judith Cummins)]

We now come to the three motions on export and investment guarantees. I will call the Minister to move the first motion and to speak to all three motions together. At the end of the debate, I will put the Question on the first motion and we will then take the remaining two motions formally.

[The Parliamentary Under-Secretary of State for Business and Trade (Gareth Thomas)]

I beg to move,

That the draft Export and Investment Guarantees (Limit on Exports and Insurance Commitments) Order 2024, which was laid before this House on 14 October, be approved.

[Madam Deputy Speaker (Judith Cummins)]

With this we will take the following motions:

That the draft Export and Investment Guarantees (Limit on Exports and Insurance Commitments) (No. 2) Order 2024, which was laid before this House on 14 October, be approved.

That the draft Export and Investment Guarantees (Limit on Exports and Insurance Commitments) (No. 3) Order 2024, which was laid before this House on 14 October, be approved.

[Gareth Thomas]

These orders are technical in nature and relate to the capacity of UK Export Finance—which is the operating name of the Export Credits Guarantee Department, the UK’s export credit agency—to support current and prospective exporters. As hon. and right hon. Members will know, UK Export Finance has a mandate to support UK exporters with finance and insurance, helping them to compete internationally. UK Export Finance, or UKEF for short, was established more than 100 years ago and is the world’s oldest export credit agency. Its support has proved crucial to British exporters throughout its existence.

UKEF helps exporters to win international contracts, to fulfil export orders, to create jobs and to get paid. Last year it provided £8.8 billion in finance to support UK exporters, and supported up to 41,000 jobs around the UK as a result. Some 88% of the businesses it supported last year were small and medium-sized enterprises. UKEF provides its finance at no net cost to the taxpayer; in fact, it generates a return for the Exchequer, with £705 million returned to the Treasury over the last three years.

The Export and Investment Guarantees Act 1991, as amended in 2015, confers powers on the Secretary of State to provide finance that is conducive to exports, and to provide insurance in connection with overseas investments. Those powers are exercised and performed through UKEF. Subject to some limited exceptions, section 6(1) of the Act imposes a limit on the aggregate amount of financial commitments that can be made under those powers—in other words, the total size of UKEF’s financial portfolio. At present, the limit stands at £67.7 billion, expressed in special drawing rights. Special drawing rights are an accounting unit for international transactions and were created by the International Monetary Fund; their value is based on a grouping of five major currencies, including pound sterling, the US dollar and the euro. The sum equates to approximately £70 billion at today’s exchange rates.

Why are we seeking an increase? Well, the current limit has been in place since 2015, and UK Export Finance’s portfolio size is now drawing close to it. Were UKEF to reach its limit, it would have to pause its vital financing activity, which, in turn, would cut off its support to prospective exporters. I should note that, in practice, the size of UKEF’s portfolio is subject to a limit set by the Treasury. This limit, called the maximum commitment limit, must be lower than the statutory limit set out in legislation. I am therefore proposing these statutory instruments to increase the commitment limit in section 6(1), and to avoid the future risk of having to turn away applications for UKEF support.

Section 6 of the Act enables the Secretary of State, by order, to further increase the limit by up to £5 billion. The power to make such an order may be exercised on up to three occasions and has not been used before. I am therefore seeking approval of these three orders together, which would allow us to increase UKEF’s statutory commitment limit by £5 billion per order, for a total of £15 billion. Inflation since the limit was last amended and the increasing transaction sizes that the Department is supporting mean that the Department is now approaching that legal limit.

Laying these SIs together is about future-proofing UKEF and giving it sufficient legal capacity to provide certainty for its customers. Again, it is a decision for Treasury Ministers to then confirm the actual commitment limit under which the Department operates. After they have come into force, the three instruments taken together will increase the commitment limit to 82.7 billion special drawing rights, which converts to around £84 billion pounds at today’s exchange rates.

UK Export Finance is delivering an ambitious five-year business plan that aligns with this Government’s missions, supporting growth and prosperity for UK exporters and their communities across the country, and doing so at no net cost to the taxpayer, but its ability to do so will be at risk without the additional legal headroom that these instruments provide. These changes will therefore allow UK Export Finance to continue meeting its mandate in supporting exports and driving growth—something that I am sure those in all parts of the House will join me in welcoming. I commend these orders to the House.

[Dame Harriett Baldwin (West Worcestershire) (Con)]

I want to start by saying “Exporting is GREAT”, and UK Export Finance, as the Minister just outlined, has done a tremendous job over many decades in supporting great British exporters, so we support these changes to the export and investment guarantees. As the Minister said, we financed £8.8 billion in export support last year, and that helped 650 UK companies to fulfil their potential by growing their overseas sales.

Today, I would like to probe the Government’s attitude towards exports, and I would particularly like to hear the Minister put on record his support for free trade at this time. The UK is now in the enviable position that almost 50% of our products can now be exported tariff-free, thanks to the tireless work done under the previous Government to increase the number of markets that our exporters have access to. That compares with the EU figure of some 27%. Raising the level of exports to a target of £1 trillion would be truly tremendous for the growth of this country. It would support higher-skilled jobs and raise profitability, productivity and tax contributions, so in the view of the Opposition, the Government cannot do enough to support the growth of exports.

I want to take this opportunity to ask the Minister about specific policies. Will he be continuing the previous Government’s programme of having trade envoys around the world helping with the export connections for our exporters? Are the Government planning to take forward the discussions between the previous Government and the previous Trump Administration on a free trade agreement with the US? Will the Government be taking forward the work that was done at state-by-state level to increase trade access for UK exporters into US states?

Turning to the specific measures in front of us today, has the Minister considered amending the Act itself so that the possibility could exist to increase resources by more than the 5,000 million special drawing rights that are currently covered by the legislation? The previous Act says that this mechanism can be used only three times, so I wonder what provisions the Minister has in mind for the next time the Government want to increase support to exporters through UKEF.

As far as other export initiatives are concerned, can the Minister confirm that he will continue to support the “Exporting is GREAT” campaign and the GREAT campaign generally, given the incredibly good feedback that they tend to get around the world? Lastly, can he confirm that he will remain on the side of our exporters, our wealth creators and the many businesses across this country that do so much to raise the prosperity of the United Kingdom?

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.