Quick wins and flawed targets: UK government urged to improve support for exporters

UK support for exporters is being hampered by questionable targets, short-term deals and a concentration of value across a small number of markets, according to an audit by the country’s public spending watchdog.

The National Audit Office (NAO), an independent body that monitors government spending, published a detailed review on July 17 of the work done by the Department for International Trade (DIT) – set up in 2016 after the UK voted to leave the European Union – and UK Export Finance, the country’s export credit agency.

The audit office concludes that the DIT “has made a good start in developing a strategy and the operating arrangements it needs to support export growth”, while UKEF has expanded its support for exporters within the financial limits set by Treasury.

“However, both DIT and UKEF face significant challenges and will need to work together to strengthen their approach to ensure that they achieve value for money over time,” the report says.

“It is not clear whether DIT is focusing its efforts and resources in the regions and sectors where there are the greatest opportunities to support UK businesses.”

One concern raised by the audit office is that the DIT measures the success of its support for exports predominantly through “export wins” – where a deal, contract or sale is agreed following support from its network.

In 2019-20 the department achieved export wins worth £24.4bn, exceeding its internal target of £20.9bn.

Though acknowledging this approach as an effective way of incentivising staff internally, the report warns setting annual targets “focuses efforts on short-term export support rather than longer-term activities that are needed to grow exports”.

According to Meg Hillier, a Labour Co-operative MP and chair of the parliament’s Committee of Public Accounts, the report shows the department “is too geared towards banking ‘quick wins’ at the expense of demonstrating steady progress towards the government’s long-term goals”.

The report says DIT already recognises these issues, and a spokesperson for the department tells GTR it is “focusing on securing longer-term opportunities as well as working hard to boost trade and investment in the short-term”.

Another concern is the government’s ambition to increase the share of national GDP that is derived from exports from 30% to 35%, initially set out in 2018 by then-Prime Minister Theresa May.

The NAO points out that no timeframe has been set for achieving this target, making it “difficult to hold DIT accountable for its progress”.

At the same time, the difficulty of the target changes according to external economic factors such as fluctuations in GDP – already highly unpredictable due to the impact of the Covid-19 pandemic.

Other flaws identified are that the department has not carried out a strategic analysis of the export opportunities for UK firms, and has not assessed the extent to which its support is required, leaving DIT with a patchy understanding of different sectors.

Though it has good information on UK exporters in well-established sectors, such as aerospace, the report says that is not the case for emerging sectors, such as renewable energy.

“Where UK supply chains are less developed and less well understood, DIT is still developing its understanding of which UK businesses are ready to export,” it says.

 

Export finance

In terms of UKEF, which offers a range of support measures including government-backed insurance cover and direct lending facilities, the report also identifies several areas in need of improvement.

It points out that though UKEF supported exports to 72 countries in 2018-19, 80% of the value of those transactions was concentrated in just five countries, in support of large projects.

“UKEF has highlighted Africa as a region where there is potential to support more deals with export finance, but it has not yet supported any export deals in most African countries,” the report adds.

The audit office also says stakeholders are concerned about UKEF’s application process. Though a digital process has been put in place that allows firms to seek immediate cover, only 62% of the 389 applications submitted last year were eligible. Reverting to manual processes takes an average of 49 days.

Some of these issues are already being addressed. UKEF has already streamlined its eligibility criteria for using that online process, and alongside DIT is in the process of developing an updated export strategy.

The report recommends the new strategy should encourage the duo to work more closely together, and should include a “robust sector-based analysis of opportunities for UK exports and UK businesses’ capacity to deliver”.

Other recommendations include forming a clear plan on obtaining and using data on which UK businesses are currently exporting goods and services, and developing a better understanding of the challenges businesses face accessing export finance.

Marcus Dolman, co-chairman of the British Exporters Association (BExA), urges the government to consult closely with businesses before finalising any new strategy.

“We strongly advocate that DIT and UKEF seek the opinions of exporters, individually and through trade associations like BExA, before implementing any of the NAO’s recommendations to ensure that any such improvements will deliver the expected benefits to exporters,” he says.

Speaking on behalf of both DIT and UKEF, a government spokesperson adds: “We will do whatever it takes to ensure businesses can access the right tools, finance and in-market expertise to succeed on the global stage.”

The post Quick wins and flawed targets: UK government urged to improve support for exporters appeared first on Global Trade Review (GTR).

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