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30-668: The Export Credits Guarantee Department ( ECGD ), branded as UK Export Finance ( UKEF ), is the export credit agency and a ministerial department of the Government of the United Kingdom . In 1920, UKEF had a maximum total exposure of just £26 million. Today, its maximum commitment stands at £50 billion. ECGD derives its powers from the Export and Investment Guarantees Act 1991 (c. 67) and undertakes its activities in accordance with specific consent from HM Treasury . ECGD

60-523: A different name. As such, the activities of ECAs are considered by some to be a type of corporate welfare . Others argue that ECAs create debt in poor countries motivated not by development goals but to support rich countries' industry. In addition, ECAs may soak up aid money as debt relief programs predominantly relieve poor countries from debt owed to donor countries' ECAs. ECAs are also criticised for insuring companies against political actions that aim to protect workers' rights , other human rights , or

90-607: A free-trade agreement (FTA) between 11 countries around the Pacific Rim: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan. It successfully concluded an agreement after two years of negotiations. In April 2021, The Lord Grimstone of Boscobel established the UK Investment Council under the DBT to enhance UK inward investment and inform the trade policy of

120-463: A level playing field (whereby competition is based on the price and quality of the exported goods and not the financial terms provided) and working to eliminate subsidies and trade distortions related to officially supported export credits. Since 1999, country risk categories have been harmonized by the Arrangement and minimum premium rates have been allocated to the various risk categories. This

150-418: A minimum degree of "softness". "Softness" is measured by a formula that compares the present value of the credit with the present value of the same amount at standardized "commercial" terms. This difference is expressed as a percentage of the credit and called "concessionality level". Thus a grant has a concessionality level of 100%, a commercial credit scores zero per cent. The higher the concessionality level,

180-435: A number of junior ministers. The incumbent is Jonathan Reynolds . The department was established on 7 February 2023. It combines the business-focused responsibilities of the former Department for Business, Energy, and Industrial Strategy (BEIS) with the former Department for International Trade (DIT). The ministers and senior civil servants from DIT were carried over to continue leading the new department. The creation of

210-1080: A recalcitrant borrower. These arguments for and against export credits are not new and have been studied at length in academic literature. For a good general discussion, see Baron, David P. The Export-Import Bank: An Economic Analysis. Academic Press. 1983.; or Eaton, Jonathan. "Credit Policy and International Competition." Strategic Trade Policy and the New International Economics, ed. Paul Krugman. MIT Press, Cambridge Mass. 1988. Department for Business and Trade King Charles III [REDACTED] William, Prince of Wales [REDACTED] Charles III ( King-in-Council ) [REDACTED] Starmer ministry ( L ) Keir Starmer ( L ) Angela Rayner ( L ) ( King-in-Parliament ) [REDACTED] Charles III [REDACTED] [REDACTED] [REDACTED] The Lord Reed The Lord Hodge Andrew Bailey Monetary Policy Committee The Department for Business and Trade ( DBT )

240-571: Is a ministerial department of the Government of the United Kingdom . It was established on 7 February 2023 by a cabinet reshuffle under the Rishi Sunak premiership . The new department absorbed the functions of the former Department for International Trade and some of the functions of the former Department for Business, Energy, and Industrial Strategy . The department is headed by the Secretary of State for Business and Trade , assisted by

270-829: Is bound by WTO members' commitments with respect to subsidised agricultural exports (see the WTO Appellate Body decision on the Brazil-US cotton case as it relates to the General Sales Manager (GSM) 102 and 103 programs and other US agricultural export credits, summarized here ). At the EU level, the European Commission, in particular the Directorate General for Trade , plays a role in the harmonization of Export Credit Agencies and

300-480: Is intended to ensure that competition takes place via pricing and the quality of the goods exported, and not in terms of how much support a state provides for its exporters. The Arrangement does not extend to exports of agricultural commodities or military equipment. A recent decision at the World Trade Organization (WTO) indicates that the use of officially supported export credits in agriculture

330-499: Is required by the HM Government to operate slightly better than break even, by charging premiums from exporters at levels that match the perceived risks and costs in each case. The largest part of ECGD's activities involves underwriting long-term loans to support the sale of capital goods, principally for the export of aircraft, bridges, machinery, and services; it helps UK companies take part in major overseas projects such as

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360-497: Is sustainable. ECGD's short term credit business was sold to Dutch insurer NCM Group in 1991, later becoming part of Atradius in 2004. The ECGD has been the subject of criticism by UK-based NGOs; The Corner House has claimed that the ECGD has in effect provided public subsidy for bribery; Campaign Against Arms Trade has argued that the ECGD provides excessive levels of support for arms sales; Jubilee Debt Campaign has argued that

390-736: The Business and Trade Select Committee of the House of Commons . This is a renaming of the Business Energy and Industrial Strategy Committee, which absorbs the responsibilities of the dissolved International Trade Committee. The department was responsible for finalising negotiations for the UK's to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in April 2023,

420-472: The Foreign, Commonwealth and Development Office , that makes sure that the countries defined as heavily indebted poor countries and those exclusively dependent on International Development Association financing only get official export credits from the UK for projects that help social and economic development without creating a new unsustainable debt burden. ECGD continues to check that the proposed borrowing

450-600: The 2018–2019 financial year alone, ECGD committed nearly £2 billion in support to fossil fuel projects across the world. A Parliamentary inquiry called on ECGD to stop funding fossil fuel projects by the end of 2021, citing that the scale of fossil fuel support violated the UK's obligations under the Paris Agreement . While in the early years of the decade, the proportion of ECGD's business in support of weapons exports ranged from 30% to 50%, this has now declined to under 1% in 2009–10. ECGD seeks advice on arms sales from

480-693: The OECD arrangement in providing export credit is mandatory in EU countries under Art. 1 of Regulation (EU) No. 1233/2011. The Berne Union , or officially, the International Union of Credit & Investment Insurers, is an international organisation for the export credit and investment insurance industry. The Berne Union and Prague Club combined have more than 70 member companies spanning the globe. Its membership includes both commercial and state-sponsored insurers. Some observers view state-sponsored export credits as nothing more than export subsidies by

510-443: The OECD's arrangement on official export credits. The Arrangement is a "Gentlemen's Agreement" amongst its Participants who represent most OECD Member Governments. The Arrangement sets forth the most generous export credit terms and conditions that may be supported by its Participants. The main purpose of Arrangement is to provide a framework for the orderly use of officially supported export credits. In practice, this means providing for

540-580: The UK by providing a forum for global investors to offer high-level advice to the government. In May 2023, the Minister for Investment, The Lord Johnson of Lainston , became the first UK government minister to visit Hong Kong since 2018, and the first since the imposition of a new national security law by Beijing in the Special Administration Region. In May 2023, the department announced that it had commenced negotiations for

570-727: The United Kingdom Export Control Organisation (ECO), part of the Department for Business and Trade . All applications are assessed, on a case-by-case basis, against the consolidated EU and National Arms Export Licensing criteria. The ECO's advice is not always followed by the government, though. In February 2016, the head of the Export Control Organisation, Edward Bell, advised Business Secretary Sajid Javid that Britain should suspend arms sales to Saudi Arabia. This advice

600-560: The World Bank and Regional Development Banks, bilateral and multilateral aid, etc.). As a result of the claims against developing countries that have resulted from ECA transactions, ECAs hold over 25% of these developing countries' US$ 2.2 trillion debt. Export credit agencies use three methods to provide funds to an importing entity: Credits may be short term (up to two years), medium term (two to five years) or long term (five to ten years). They are usually supplier's credits, extended to

630-725: The cancellation of debts owed to the ECGD should not be counted towards UK Official Development Assistance figures; World Wide Fund for Nature argues that excessive greenhouse gases are emitted from ECGD-supported projects and that this is inconsistent with wider UK environmental policy. In recent years, the ECGD has been heavily criticised for prioritising investment in fossil fuels over renewable energy. A Catholic Agency For Overseas Development report showed that from 2010 to 2017, an estimated 97% of ECGD energy-related support went to fossil fuel development, principally oil and gas exploration and production in upper-middle-income countries. Just 3% went to renewables. The Guardian reported that in

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660-427: The co-ordination of policy statements and negotiation positions. This is based on council decisions 73/391/EEC and 76/641/EEC. These decisions provide for prior consultations among member states on long term export credits. Member states may ask each other if they are considering to finance a specific transaction with official export credit support. EU members may not subsidize intra-EU export credits. The application of

690-446: The construction of oil and gas pipelines and the upgrading of hospitals, airports, and power stations. Support can be given for contracts as low as £ 1,000, but some of the projects ECGD backs go well beyond the £1 billion mark. As part of its risk management process, ECGD has to make a judgement on the ability of a country to meet its debt obligations. The department uses a "productive expenditure" test, undertaken in consultation with

720-588: The exporter, but they may be buyer's credits, extended to the importer. The risk on these credits, as well as on guarantees and insurance, is borne by the sponsoring government. ECAs limit this risk by being "closed" on risky countries, meaning that they do not accept any risk on these countries. In addition, a committee of government and ECA officials will review large and otherwise riskier than normal transactions. Officially supported export credit may be connected to official development assistance (ODA) in two ways. First, they may be mixed with ODA, while still financing

750-463: The more the tied aid credit looks like ODA, the lower, the more it looks like an export credit. Partially untied credits consist of a tied and an untied part. The latter is usually intended to finance "local cost", investment cost to be made in the importing country. This part may also be in a local currency. Partially untied aid is treated as tied aid. Both officially supported export credits and tied aid credit and grants are extended on terms bound by

780-406: The natural environment in the countries in which the investment is being made. Advocates of ECAs assert that export credits allow impoverished importers to purchase needed goods that would otherwise be unaffordable; export credits are components of a broader strategy of trade policies; and government involvement can achieve results that the private sector cannot, such as applying greater pressure on

810-405: The new department was described by Downing Street as an opportunity to provide "a single, coherent voice for business inside government, focused on growing the economy with better regulation, new trade deals abroad, and a renewed culture of enterprise at home". The department's focus was outlined by Downing Street as follows: Since 26 April 2023, the work of the department has been scrutinised by

840-500: The same project (mixed credit). As the export credit is tied to purchases in the issuing country, the whole package qualifies as a tied aid credit, even if the ODA part is untied aid. Second, tied aid credits are not very different from export credits, except in interest, grace period (the time when there is no repayment of the principal) and terms of repayment. Such credits are separated from export credit by an OECD requirement that they have

870-618: Was established in 1919 to promote UK exports, lost during the submarine blockade of World War I. In recent years we have supported business in the aerospace, automotive, construction, healthcare, industrial processing, oil and gas, petrochemical, water treatment, and satellite sectors. ECGD's aim is to benefit the UK economy by helping exporters of UK goods and services to win business, and UK firms to invest overseas by providing guarantees, insurance and reinsurance against loss, taking into account HM Government's wider international policy agenda. ECGD

900-699: Was not followed by the business secretary and prime minister. ECGD aims to: It does this through the public information it provides and the declarations in its application forms; it has some powers to make inquiries but these are limited. CGD does not have a formal investigative capacity. Key aspects of ECGD's anti-bribery and corruption procedures are to: Export credit agency ECAs currently finance or underwrite about US$ 430 billion of business activity abroad – about US$ 55 billion of which goes towards project finance in developing countries – and provide US$ 14 billion of insurance for new foreign direct investment, dwarfing all other official sources combined (such as

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