Understanding UKEF's Autumn Statement 2016 measures
A summary of the additional support to be provided through UK Export Finance (UKEF).
Overview
In the Autumn Statement 2016, the Chancellor of the Exchequer announced that the government will provide additional support through UKEF by:
- doubling its total risk appetite to £5 billion, and increasing its capacity for support in individual markets by up to 100%; this will be supported by an improved risk management framework and the use of private insurance markets to reduce Exchequer exposure
- increasing the number of pre-approved local currencies in which UKEF can offer support from 10 to 40, enabling more overseas buyers of UK exports to pay in their own currency
What does this mean for exporters?
UKEF now has a significant increase in its capacity to do business across the world and to support overseas buyers in their own currency in more markets. Taken together, these measures mean that UKEF is better equipped than ever to ensure that no viable export fails for lack of finance or insurance.
Exposure versus risk appetite limits
Its maximum commitment, or the maximum permitted size of UKEF’s portfolio, is £50 billion. UKEF’s current exposure is approximately £20 billion, meaning that it has a remaining capacity of £30 billion to support UK exports.
| UKEF’s portfolio | Current exposure | Remaining capacity | Total |
|---|---|---|---|
| UKEF’s portfolio | £20 billion | £30 billion | £50 billion |
UKEF’s risk appetite is a measure of risk based on an assessment of potential future losses. By doubling the limit from £2.5 billion to £5 billion, UKEF has twice as much capacity to support new export business globally.
This means that UKEF can better exploit this £50 billion portfolio capacity, enabling the department to support significantly more trade in future, and therefore help more UK companies export more.
Country cover limits
UKEF sets a maximum cover limit for each market, which is currently capped at £2.5 billion. The maximum cover limit for individual markets has now doubled to up to £5 billion. This could result in as much as £2.5 billion of additional capacity to support exports to some destinations.
The following table illustrates the potential impact on our current market limits. Please note that these projected limits are indicative only, and are not confirmed. Each limit will be subject to individual market reviews, which UKEF will undertake in the coming months.
| Country cover limits | Current capacity | Additional capacity | Total |
|---|---|---|---|
| Indonesia | £1 billion | £1 billion | £2 billion |
| Mexico | £1 billion | £1 billion | £2 billion |
| UAE | £1 billion | £1 billion | £2 billion |
| Vietnam | £0.5 billion | £0.5 billion | £1 billion |
Check UKEF’s current cover positions.
Local currency financing
Under the local currency finance scheme, UKEF can provide a guarantee on a loan to an overseas buyer in their own currency to finance the purchase of capital goods and/or services from a UK exporter. This allows the overseas buyer to buy from the UK but pay in their own currency.
UKEF will now be able to support transactions in 40 currencies, quadruple the number it has previously been able to consider. This flexibility will be hugely attractive to overseas buyers, allowing them to “buy British, pay local.” It goes far beyond other export credit agencies’ offerings, giving UK exporters a clear competitive advantage.
Find out more about local currency financing.
Risk management
UKEF is enhancing its active approach to managing its portfolio, allowing us to manage risk concentrations.
In addition, UKEF is working with HM Treasury to ensure its risk management framework is commensurate with its increased risk appetite.