UK Budget export finance announcements good news, but sectors need support on eligibility and access, says expert

Out-Law News | 20 Mar 2014 | 4:40 pm | 2 min. read

UK manufacturers will be able to borrow up to £3 billion to support exports abroad at lower rates of interest, the Chancellor of the Exchequer has announced.

George Osborne pledged to offer "the best export finance in Europe" to UK manufacturers as part of a package of measures aimed at boosting manufacturing and increasing exports. As well as doubling to £3bn the amount of credit available under the export finance scheme and cutting interest on those loans by a third, the government would also take action to cut the amount that manufacturers spend on air passenger duty (APD) and energy use, he said.

"We're not going to have a secure economic future if Britain doesn't earn its way in the world," he said.

"For decades the British government has been the last port of call when we should be backing British businesses wanting to sell abroad. Today we fundamentally change that ... Instead of having the least competitive export finance in Europe, we will have the most competitive," he said.

According to the Budget document, the government will also expand the remit of UK Export Finance (UKEF) to include supporting the UK-based supply chains of exporters and intangible exports for the first time. This will involve changing the legislation underpinning the department. It also plans better marketing to make more businesses aware of UKEF's products and services, according to the document.

Manufacturing expert Jayne Hussey of Pinsent Masons, the law firm behind Out-Law.com, said that UK firms would be pleased to see the government's continued support for growth in exports. However, she said that smaller businesses in particular needed more help obtaining access to the export finance programme.

"Industry feedback, particularly at SME level, is that there are too many government and semi-government agencies offering advice, guidance and possible access to finance – and that it is often difficult to understand how to access the right support and advice," she said. "There is not enough clarity around eligibility for funding and how to access it. On a very practical level, there is a need to communicate the help that is available better and to appoint one central body to take the lead."

"Manufacturers remain cautious of external finance - irrespective of who is it coming from - and the export finance scheme still faces challenges to build awareness, accessibility and confidence. There is a real risk of creating supply without effectively ensuring the additional export funds are used to achieve the overall objective," she said.

Other business-friendly measures announced by the Chancellor included an extension of the annual investment allowance against corporation tax. This would be doubled to £500,000 and extended until the end of 2015, he said. APD would be simplified so that all long-haul flights would be taxed at the same lower 'band B' tax rate charged on flights to the US and private flights would be included in the regime, he said.

The government would also take action to reduce manufacturers' energy costs, ensuring that the UK remained a competitive location for manufacturing, he said. Measures in what was described as a package worth £7bn included a cap on the carbon price floor and an extension of the existing compensation scheme for energy intensive industries for a further four years, until 2019-20.

However, manufacturing expert Jayne Hussey said that although these announcements were a "step in the right direction", taking action to reduce manufacturers' energy costs "sits awkwardly with the significant investment needed in UK energy infrastructure".

"I am not sure, if I was speaking to my clients operating in the UK or those considering setting up, that this would be reassuring enough to alleviate concerns around high running costs given the how relatively cheap energy is in some other markets," she said. "Has the cost of manufacturing in Britain genuinely been addressed? Energy is an important part of the picture, but manufacturers may consider that some of their higher costs remain linked to red tape and compliance."