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Summary

This analysis presents the results of polling of a reflective sample of UK exporting firms on three broad areas: their general experiences and views of UK Export Finance (UKEF), in the case of exporting firms familiar with UKEF; the impact of COVID-19 on UK exporting firms and their views on the support provided by UKEF; and, their views on how UKEF can support the transition to a net-zero world.

This analysis comes at a crucial time for UKEF and climate policy. The UK is co-hosting the UN Climate Change Conference (COP26) later this year and the Government recently announced that UKEF will phase out any financing, products or services for fossil fuel exporting projects.

The key findings are:

  • A majority of exporting firms that are familiar with UKEF (57%) state that their overall experience with accessing or applying for UKEF financing, products or services has been positive.
  • Among UK exporting firms that are familiar with UKEF, a majority say that it is important (68%) for sustaining their firms’ exporting business. 
  • UK exporting firms that are familiar with UKEF believe that the top three improvements to the UKEF application process would be: more guidance with Brexit-related impacts (33%), more financial support for COVID-affected sector exports (29%), and reducing the amount of paperwork in the application process (29%).
  • A majority of UK exporting firms familiar with UKEF (50%) expect to use its financing, services, and products more over the next two years. The main reasons for wanting to use UKEF more among these exporting firms is to mitigate Brexit-related (38%) and COVID-related (34%) impacts and to develop new export projects (34%). 
  • A majority of UK exporting firms (83%) have faced disruptions due to the COVID-19 pandemic, with a plurality of exporting firms (43%) stating that the pandemic has overall negatively impacted their firm’s business. 
  • A majority of respondents (56%) believe that UKEF is currently doing enough to assist exporting firms during the COVID-19 pandemic. However, to assist with recovery from the COVID-19 pandemic, UK exporting firms are most likely to want to see UKEF expand export project guarantees (46%), advisory services (43%), and export credits (40%).
  • Above and beyond supporting exporters doing business, the most popular additional government objectives for UKEF among UK exporters is reducing climate change, with 82% stating that UKEF should prioritise the reduction of carbon emissions as a major goal. However, other government goals also have gained majority support: 79% of UK exporting firms believe UKEF should prioritise the protection of biodiversity and nature, 77% want UKEF to protect domestic employment and 72% want UKEF to support economically disadvantaged regions.
  • There is strong majority support for a wide range of climate policy actions by UKEF among UK exporting firms, especially: providing more generous financing terms to exporting firms that help to address climate change (73%); assisting exporting firms with preparation for and adaptation to climate-related risks (72%); and, prioritising job creation within the renewable energy sector over protecting employment in the oil and gas sectors (71%). 
  • A majority of UK exporters (70%) believe UKEF should be a leader globally among Export Credit Agencies (ECAs) on climate change.
  • A firm majority of UK exporting firms (83%) favour UKEF providing better financing terms for exports of low-carbon goods and services, with only a handful of exporting firms (2%) expressing opposition.
  • A majority (50%) of all UK exporting firms favour the UK Government phasing out UKEF support for the development of fossil fuel projects within the next five years. 

Business size and business location are firm attributes frequently associated with a difference in views among UK exporting firms towards UKEF, while export region is a firm attribute sometimes associated with a difference in views. Smaller firms tend to be more likely to hold views on UKEF which are neutral or not to hold views at all, indicating a lower degree of engagement. Second, firms located in London are slightly more likely to be supportive of action on climate.

Introduction

Export credit agencies (ECAs) are public financial institutions that promote and support the export of goods and services by businesses from their home countries. ECA support often seeks to address gaps in the private sector’s provision of finance and insurance for exporters, with this support taking the form of government-backed loans, project insurance, funding guarantees, and export credits, among other products and services. In obtaining this support from ECAs, exporters attempt to reduce the risks and costs associated with doing business abroad. 

ECAs operate on the basis of applications from exporters. While the difficulty of funding application processes vary, in most cases exporters (and their foreign partners) must provide relevant information regarding the scope, feasibility and potential risks of the export project in question. ECA assistance is often conditional upon export projects complying with social, human rights, and environmental standards.

In the UK, export promotion powers reside with the Export Credit and Guarantees Department (ECGD), which operates under the name UK Export Finance (UKEF). UKEF’s mission is “to ensure that no viable UK export fails for lack of finance or insurance, while operating at no net cost to the taxpayer.”[i] UKEF requires exporters to submit applications through private lending institutions and then, if approved, guarantees the loans, financing or insurance requested by exporters. UKEF provided £4.4 billion worth of financing and insurance to over 300 UK exporters in 2019-2020.[ii]

Since the spread of COVID-19, UK exporters have been severely impacted by domestic and international measures taken to control the pandemic, especially disruptions to international trade arising from national and regional lockdowns and the restrictions on movement.[iii] The Office for National Statistics (ONS) found earlier in 2020 that 73% of UK exporting firms were exporting less than normal and that 80% of exporting firms were facing disruption to normal business operations.[iv] In response, UKEF expanded a number of facilities and services to assist UK exporters, including increases in working capital assistance, export credits, and insurance.[v]

The Brexit process also creates challenges and opportunities for UK exporters. The EU-27 trading bloc is the UK’s most important trading partner, absorbing 40% of UK exports accounting for almost £300 billion per annum.[vi]

UKEF has had to change the way it works as a result of major international events: the global pandemic and Brexit. But even more reforms in the years ahead are urgently required because of climate change.

Since the signing of the 2015 Paris Agreement, which the UK is a co-signatory to, attention has increasingly turned to the contribution of ECAs on climate change. Studies have shown that in order to meet the Paris Agreement targets of limiting global temperature rise to 1.5C above pre-industrial levels by 2100, ECAs will need to eliminate the carbon emissions of their investment portfolios and shift energy financing toward net zero carbon export projects.[viii] While some ECAs have taken firmer action on reducing financing and insurance for fossil fuel projects – such as those in high-income countries, including the UK phasing out financing of all fossil fuel projects and Germany agreeing to phase out financing for coal projects[vii] – no ECA in the world to date has yet fully eliminated this financing and support, much less set out a comprehensive strategy, with accountable interim targets, for achieving full alignment with Paris Agreement objectives.[ix]

Despite the recent commitments by the UK Government to phase out overseas fossil fuel financing and inject £2 billion for UKEF to increase lending for low-carbon exports, UKEF currently lags behind other ECAs on commitments to transition financing toward low-carbon energy exports.[x] The House of Commons Environmental Audit Committee’s (EAC) recent report on UKEF found that between 2013 and 2018, UKEF provided £2.6 billion for energy projects in high-income countries, but only around 4% of this total (£105 million) went to low-carbon or renewable energy firms.[xi] These figures compare poorly with other European ECAs, such as those of Denmark, which supported €5.7 billion in wind energy exports in 2018 alone with no support in that particular year for fossil fuel projects, and Germany, which supported €920 million worth of renewable energy projects in 2018, with only €360 million for fossil fuels.[xii]

Furthermore, almost all of UKEF’s financing for energy projects in low- and middle-income countries in recent years (99.4% in 2017-18 according to the EAC report[xiii]) has gone to high-carbon infrastructure projects. In June 2020, for example, UKEF approved a £1 billion financing package for a liquefied natural gas (LNG) pipeline in Mozambique.[xiv] Indeed, the Mozambique project is set to proceed despite the recently announced phase-out of UKEF supporting fossil fuels, which is expected to take effect at the very earliest from April 2021, while the application for the latter is still pending. In essence, with this support, UKEF is effectively locking vulnerable societies into higher carbon emissions over the long-term, delaying the transition to renewable sources and undermining the UK’s climate agenda. UKEF is also potentially creating ‘stranded assets’ whose value and profitability will decline sharply as decarbonisation gathers pace, inflicting financial losses on governments and private investors.[xv] As a signatory to the Paris Agreement, the UK is legally obligated to ensure that UKEF aligns its policies and practices with its provisions and prevents these outcomes.

In light of the reforms that UKEF is undertaking and needs to undertake as a result of COVID-19, Brexit and – in particular – climate change, we wanted to unearth the experiences with and evaluations of UKEF by UK exporting firms, especially on how UKEF is supporting and can support firms to transition and align with the UK 2008 Climate Change Act and the objectives of the 2015 Paris Agreement. This analysis will inform the creation of ideas and recommendations for reforming UKEF so it can better achieve public policy goals, including but not limited to, tackling climate change. Indeed, as part of our work we are also interested in how UKEF could contribute to wider public policy objectives, such as protecting nature and ‘levelling up’ the UK.

Understanding in detail the experiences of UK exporting firms is the first stage of this wider Bright Blue project.

This polling focused on the views of UK exporting firms on three broad areas:

  • The general experiences and views of UK exporting firms on UKEF
  • The impact of COVID-19 on UK exporting firms and their views on the support provided by UKEF
  • The views of UK exporting firms on how UKEF can support the transition to a net-zero world

Methodology

Polling was undertaken by Opinium and conducted between 12th and 15th November 2020. The sample consisted of 750 respondents working in exporting firms located in the UK. All respondents are responsible for at least one significant managerial function of the business in which they are employed, and are hence treated as representatives of their exporting firms. 

The sample was subdivided according to interaction with UKEF, resulting in two respondent groups. The first consisted of 642 exporting firms which had applied for and/or received UKEF funding, or at the very least were simply aware of UKEF. Together, they are referred throughout this report as exporting firms familiar with UKEF. The second was made up of 108 exporting firms which had no prior knowledge of UKEF, but were provided a brief overview of the organisation’s role from the outset of the survey. These segments received different sets of questions, with the former receiving all questions, including those on applying for or receiving UKEF financing, products and support, and the latter receiving only questions about the impact of COVID-19 and climate change policies.

To make the sample of exporters broadly reflective of all UK exporting firms, the sample was designed to ensure there were different attributes of firms that were included, including variance by export sector, firm size, business location in the UK, annual turnover, and primary export region.[xvi] For business location, Scotland, Wales, and Northern Ireland are combined as “Rest of UK”, and East of England is included in the “South” category. In our analysis, we only highlight notable differences in attitudes by these firm attributes.

General experiences of and views of UK exporting firms on UKEF

To begin with, we asked UK exporting firms who are familiar with UKEF how they have previously engaged with UKEF, inviting them to select all the financing, products or services they have applied for or received. As seen in Table 1 below, UK exporting firms have used or sought out a wide range of UKEF financing, products and services.

Table 1. Proportion of UK exporting firms that are familiar with UKEF who have used or sought out specific UKEF financing, products or services[xvii]

The most popular UKEF financing, product or service is Export Insurance, which has been used or sought out by 29% of UK exporting firms, followed by Export Credits at 24% of UK exporting firms and Advisory Services at 22%. Just under a quarter (23%) of firms who are familiar with UKEF have not sought or obtained financing, products or services from UKEF.

Micro-sized firms familiar with UKEF were much more likely not to have engaged with UKEF (51%) than firms of all other sizes. Similarly, exporting firms familiar with UKEF located in the South (32%), rest of the UK (30%) and the North (26%) were less likely to have engaged with UKEF than those in the Midlands (17%) or London (14%).

We then asked UK exporting firms to share their evaluations of UKEF and to rate the overall importance of its financing, products and services for sustaining their firm’s exporting business.

As seen in Chart 1 below, the reviews of UKEF from exporting firms are generally positive. Among UK exporting firms who are familiar with UKEF, the majority (57%) rate their overall experience positively (‘very good’ or ‘good’), while very few (3%) rate it negatively (‘poor’ or ‘very poor’).

As shown in Chart 1 above, the positive assessments of engaging with UKEF are more likely to be observed among large-sized firms who are familiar with UKEF (67%). For medium-sized exporting firms who are familiar with UKEF, a majority were positive (55%). The views expressed by small-sized firms familiar with UKEF are roughly similar, though with a smaller majority assessing its engagement with UKEF positively (51%). Finally, the views among micro-sized firms familiar with UKEF were notably less positive, with only 28% rating the experience positively. The responses among this group, however, had a large number of firms for which UKEF was not applicable (40%), suggesting that although they had heard of UKEF, they had not applied for any support from it. 

There are also some small differences between firms located in different regions, with those in London familiar with UKEF most likely to evaluate the experience positively (66%), while those in the South of England familiar with UKEF were the least likely to do so (48%), though it is notable that negative evaluations are at very low levels across all regions.  

There is also some minor variation in positive evaluations of UKEF by the regions to which firms export to, ranging from 68% for those exporting to South Asia to 56% for those exporting to South America. However, there are no differences in negative evaluations, indicating that a large majority of firms have a positive view regardless of the export region. 

Next, we wanted to assess the importance of UKEF financing, products and services for UK firms who were familiar with UKEF. When examining the importance of UKEF financing, products and services for firms who were familiar with it, we find that a majority (68%) state that they are important (including both ‘important’ and ‘very important’ responses) for sustaining their firms’ exporting firms, as displayed in Chart 2 below. 

There is an association between larger firm size and greater importance of UKEF financing, products and services, as Chart 2 above shows. A substantial majority of large exporting firms familiar with UKEF (77%) consider UKEF financing, products and services as important, but this falls slightly to 66% for medium-sized firms familiar with UKEF and 63% for small-sized firms familiar with UKEF. The importance of UKEF financing, products and services was lowest among micro-sized firms familiar with UKEF, with only 42% stating their importance.

Chart 2 above also shows views on the importance of UKEF financing, products and services by business location, highlighting that importance of UKEF differs slightly across UK regions. A strong majority of exporting firms familiar with UKEF located in the Midlands (77%) indicate that UKEF financing, products and services are important for sustaining their business, closely followed by a large majority of firms familiar with UKEF in London (74%) and in the North (71%). However, firms familiar with UKEF were notably less likely to describe UKEF as important in the South (56%) and in the rest of the UK (61%).

Additionally, there are minor differences between firms in terms of their export region, with 80% of firms familiar with UKEF exporting to Africa describing UKEF financing, products and services as very important, as opposed to 68% of firms familiar with UKEF which export to South America, with other regions falling in between, meaning that large majorities describe UKEF financing, products and support as important regardless of their export market.

With UKEF seen as both positive and important for a broad range of UK exporting firms, we also asked those familiar with UKEF to share their views on the three reforms which would most improve the UKEF application process, as highlighted in Chart 3 below. 

Exporting firms that are familiar with UKEF would like a broad range of reforms to the UKEF application process, but each reform only garners minority support, highlighting that firms differ substantially on what matters to them. For example, more guidance about Brexit-related impacts is the most popular reform, but only by 33% of firms familiar with UKEF. Other concerns such as more financial support for COVID-affected export sectors (29%), reduced amount of paperwork during applications (29%), more support during the application process (28%), more coordination with bank lenders (27%) and shorter length of applications (25%) are cited by firms familiar with UKEF at broadly similar rates, indicating a diverse range of requested reforms. Overall, only 12% of firms familiar with UKEF say there is no need for improvement, suggesting that UKEF could make a series of reforms to improve their application process.

We also observe some differences between firms of different sizes, as shown in Chart 3 above. Overall, large- and medium-sized firms familiar with UKEF are consistently more likely to want all the different reforms to UKEF in comparison to small- and micro-sized firms familiar with UKEF. For micro- and small-sized firms familiar with UKEF, the most popular reform is reducing the amount of paperwork in the application process (29% and 26% respectively). Contrastingly, for medium- and large-sized firms familiar with UKEF, the most popular reform is more guidance about Brexit-related impacts (39% and 35% respectively). 

We then asked exporting firms that are familiar with UKEF whether they were planning to utilise more or less UKEF financing, products and services in the next two years, as shown in Chart 4 below. Most exporting firms familiar with UKEF (51%) expect to use more, with 17% expecting to use much more and 34% planning to use slightly more. In contrast, only 7% expect to use them slightly or much less. Thirty seven percent expect to use them at the same rate.

Bigger exporting firms are more likely to expect to use UKEF financing, products and services more in the next two years. While only 36% micro- and 40% small-sized exporting firms think they will be engaging with UKEF much or slightly more, this rises to 50% for medium-sized firms and 57% for large-sized firms. 

Exporting firms located in London are also more likely to expect to use UKEF financing, products and services much or slightly more in the next two years (59%), especially compared to firms located in the South (38%). 

We then asked for a specific reason for firms familiar with UKEF on why they are planning to use UKEF financing more over the next two years, with results in Chart 5 below. As this was only asked of those who are making such plans, this question has a smaller sample size, as the base in Chart 5 details.

As can be observed in Chart 5 above, firms familiar with UKEF that intend to apply for more UKEF financing, products and services over the next two years are most likely to do so to mitigate Brexit-related impacts (38%). After this, firms familiar with UKEF want to use UKEF to develop new export projects (34%) and to mitigate COVID-19-related impacts (34%). These responses are followed by the reason to access new export markets, with 33% of firms familiar with UKEF reporting this. Just over a quarter (26%) wish to apply to UKEF more to manage existing projects.

There are some minor differences by firm attributes, with small-sized firms familiar with UKEF being substantially more likely to increase their applications to UKEF to mitigate Brexit-related impacts (46%) in comparison to firms of other sizes. 

Impact of COVID-19

We wanted to assess the impact of the COVID-19 pandemic on all UK exporting firms. Unlike the section above, the responses below are of a reflective sample of all UK exporting firms, not just those exporting firms familiar with UKEF.

We started by asking all exporting firms to indicate what sort of overall impact the COVID-19 pandemic has had on their exporting business, positive or negative.

As Chart 6 illustrates below, the picture is rather mixed, but the most common overall impression is negative, with 43% facing negative (‘moderately’ or a ‘strongly’) overall impact. In contrast, a sizable minority (33%) of UK exporting firms report a positive (‘moderately’ or a ‘strongly’) overall impact from the pandemic. Just over one in five UK exporting firms report no impact at all from Covid-19 (22%).

 

Size matters for the impact of COVID-19 on UK exporting firms. As Chart 6 shows, a majority of micro-sized firms state that it was negative overall (51%), in comparison to a minority of large- (41%), medium- (40%) and small-sized firms (45%). Micro-sized exporting firms are significantly less likely to state that the impact of the pandemic was positive (14%) compared to other sized exporting firms, most notably large-sized firms, where 38% held a positive assessment of the pandemic’s impact. 

There is greater variation in the impact of Covid-19 according to the location of exporting firms within the UK. London (37%) and the rest of the UK (29%) firms are less likely to report higher levels of negative impacts compared to those located in the South (49%) Midlands (51%) and the North (45%). In fact, exporting firms in London (41%) and the rest of the UK (44%) are, unlike every other region, actually more likely to report a positive overall impact from Covid-19 than a negative overall impact. 

Although not illustrated in Chart 6 above, the severity of the pandemic’s impact on UK exporting firms also varies according to a firm’s region of export. UK firms who export to South Asia (49%) and Africa (48%) are more likely to say it had an overall negative impact, in contrast to 34% and 29% respectively who describe it having an overall positive impact. On the other hand, only 30% of exporters to Europe and 27% to the Middle East believe the pandemic had an overall negative impact, in contrast to 46% and 51% respectively who state it had an overall positive impact. 

With evidence that the COVID-19 pandemic was more likely to have a negative overall impact on all UK exporting firms, we investigated specific disruptions that the pandemic has caused for all UK exporting firms, as shown in Chart 7 below. We find that most exporting firms (83%) reported experiencing at least one kind of a disruption as a result of the pandemic, while only (17%) reported no disruption at all.

The types of negative impacts resulting from the pandemic for UK exporting firms vary. Most notably, suspended projects (26%), disrupted transportation and logistics (24%), cash flow constraints (22%), delayed payments or non-payment (22%), staff redundancies (21%) and personnel shortages (21%) are given as the most common disruptions.

There are very minor differences between exporting firms of different sizes and regions. However, the most notable variation is that micro-sized exporting firms (29%) are much more likely to report no disruptions since the start of the pandemic, compared to 11% of both small- and medium-sized exporting firms and 18% of large-sized exporting firms. 

We then asked all UK exporting firms if UKEF is doing enough to help exporters in the context of the pandemic, as seen in Chart 8 below. 

Interestingly, a majority of respondents (56%) believe that UKEF is currently doing enough to assist exporting firms during the COVID-19 pandemic. Nonetheless, around just over a quarter of exporting firms (26%) do not know if UKEF is doing enough, while just under a fifth (19%) do not believe they are doing enough. 

A majority of all micro-sized exporting firms (57%) do not have an opinion on the role of UKEF during the pandemic. In contrast, a majority of medium-sized (60%) and large-sized firms (63%) believe UKEF is doing enough to assist exporting firms during the pandemic. 

There is significant variation in attitudes towards UKEF’s support during COVID-19, with a majority of exporting firms in London (69%), the rest of the UK (62%) and the Midlands (52%) believing UKEF is doing enough to help. However, a plurality of exporting firms in all regions of the UK do concur. Interestingly, exporting firms located in the South are significantly more likely to not hold an opinion (36%) on the role of UKEF during the pandemic than firms elsewhere in the UK.

We also asked all exporting firms the top two facilities UKEF could expand to help exporting firms during the COVID-19 pandemic, as seen in Chart 9 below.

Chart 9 shows support for an expansion of a range of UKEF facilities, though none of which gain a majority of support among all UK exporting firms. The most popular request from UK exporting firms is an expansion of UKEF export project guarantees (46%), followed by advisory services (43%), export credits (40%), revised insurance items (33%) and revised loan items (32%). 

We observe some minor differences across exporting firms of different sizes and locations, as seen in Chart 9. An expansion of export project guarantees is preferred most strongly by micro-sized firms (55%) than any other sized firms, especially large-sized firms (42%). All sized firms prefer an expansion of export project guarantees, apart from large-sized firms, where there is greater support for an expansion of UKEF advisory services (45%). 

Export project guarantees have the highest level of support among exporting firms in the North (63%). Exporting firms in all regions are most likely to report wanting UKEF expanding export project guarantees, apart from the Midlands where the most popular request is an expansion of UKEF advisory services (47%). Overall, among most sizes and locations of exporting firms, additional guarantees and advisory services are the top two UKEF facilities which exporting firms would like to see expanded.

How UKEF can support the transition to a net-zero world

Looking beyond the COVID-19 pandemic, our polling assessed the attitudes of all UK exporting firms on the role of UKEF in combating climate change. As aforementioned, as a signatory to the Paris Agreement, the UK is legally obligated to ensure that UKEF aligns its policies and practices with its provisions, specifically ensuring net zero emissions by the middle of this century. What do UK exporting firms think about current and possible UKEF procedures and policies on climate change?

First, we tested whether UK exporting firms believe UKEF should in fact be supporting wider policy objectives, above and beyond supporting them with exporting. In particular, we were keen to understand whether exporting firms thought UKEF should support key government goals such as net-zero and ‘levelling up’.

Chart 10 below shows UK exporters’ views on whether UKEF should support additional government goals – economic, environmental and social.

Chart 10 demonstrates a robust consensus among UK exporting firms for UKEF supporting wider government goals, not just supporting exporting of UK firms. In fact, out of all the prime government goals, decarbonisation comes top. Over four out of five UK exporting firms (82%) state that UKEF should prioritise the reduction of carbon emissions as a major goal, thus showing the popularity of the net zero agenda for UK exporting firms.

A slightly smaller percentage of exporting firms (80%) want promoting renewable energy supply chains to also be a goal, again reinforcing the popularity among UK exporting firms of UKEF focussing on climate change policy.

Seventy nine percent of UK exporting firms believe UEKF should prioritise the protection of biodiversity and nature. These findings were consistent across exporting firms of all sizes, of all regions and of all export markets, indicating a major consensus on environmental priorities.

A sizable majority of UK exporting firms (77%) would also support UKEF working to protect domestic employment and a similar majority (72%) would support assisting economically disadvantaged regions, the so-called ‘levelling up’ agenda. Again, there were no notable differences in attitudes by any firm attributes.

We then asked UK exporting firms to share their views on specific climate change policies that could be adopted by UKEF, as indicated in Chart 11 below.

As Chart 11 above illustrates, there is strong majority support for a wide range of climate policy action by UKEF among UK exporting firms. In particular, we find majority support for: UKEF providing more generous financing terms to exporting firms that help to address climate change (73%); assisting exporting firms with preparation for and adaptation to climate-related risks (72%); and, prioritising job creation within the renewable energy sector over protecting employment in the oil and gas sectors (71%). 

In terms of UKEF’s international role, a majority of UK exporters would like for UKEF to be an important force for promoting low-carbon exports globally (73%) and to lead among other ECAs on efforts to combat climate change (70%). 

These majorities persist across exporting firms with different attributes. Overall, these findings show that UKEF has a strong mandate for pursuing bolder policies on climate at home and abroad.

Furthermore, we also examined UK exporting firms’ views on the type of financing arrangements that they believe UKEF should introduce to enable better and higher support for all low-carbon products and services, as Chart 12 illustrates below. This was done by presenting them with a simple conjoint analysis asking them to indicate their approval of export financing approaches that either emphasised incentives for low-carbon firms or disincentives for high-carbon firms.

Chart 12 above displays that around four out of five UK exporting firms (83%) favour UKEF providing better financing terms for exports of low-carbon goods and services, with only a handful of exporting firms (2%) expressing opposition, indicating a very high level of support. However, fewer exporting firms (62%) state that UKEF should provide worse financing terms for exports of high-carbon goods and services, with a slightly larger percentage (10%) opposed and over one in four (28%) remaining neutral. This data reveals that exporting firms are more likely to favour UKEF proactively offering incentives for low-carbon exporters than penalising high-carbon exporters.

Views on UKEF financing arrangements for low- and high-carbon goods and services are similar across exporting firms with different attributes, but there is a notable difference between micro-sized firms and others. Only 45% of micro-sized firms support worse financing terms for high-carbon goods and services as opposed to 68% of large-sized and 65% of small-sized firms.

As aforementioned, the UK Government recently took a crucial first step to ensuring UKEF is better aligned with the 2015 Paris Agreement, announcing that there will be a ban on UKEF supporting fossil fuel projects, phased in at the very earliest with a three months notice period from March 2021, with some exceptions. However, the UK is examining different scenarios for this notice period over the course of 2021, even into the following year.  We tested, prior to the Government’s announcement, what UK exporting firms thought would be a reasonable timeframe for phasing out UKEF financing, products and services for fossil fuel projects, as illustrated in Chart 13 below.

Conclusion

Our analysis reveals several key findings about UK exporting firms views on UKEF:

  • The majority of UK exporting firms familiar with UKEF rate their overall experience with UKEF as positive and regard UKEF’s financing, products and services as important for sustaining their firms’ exporting business. This attests to the vital role that UKEF continues to play in ensuring that UK exporting firms remain competitive and successful in international markets. UK exporting firms have accessed a wide range of UKEF financing, products, and services in support of their exporting business and contracts. However, it is clear the value of UKEF financing, products and services varies across exporting firms of different sizes and regions: larger businesses and those located in London and Midlands were more likely to state the importance of UKEF financing, products and support. 
  • Most UK exporting firms have faced COVID-19 disruptions and a plurality say that Covid-19 has had a negative overall impact. Over the past year, UK exporting firms have experienced a range of significant disruptions to their business, including suspended projects, disrupted transport, staff redundancies. To overcome the impact of these disruptions, UK exporting firms favour UKEF offering more export project guarantees, advisory services, and export credits.
  • There is a robust consensus among UK exporting firms that UKEF should introduce policies to help combat climate change. Indeed, UK exporting firms favour a range of climate change reforms that would move UKEF closer to achieving Paris alignment. These policies include a reorientation of UKEF priorities toward decarbonisation, renewable energy exports, and assisting exporters with preparation for and adaptation to climate-related risks. UK exporting firms also favour the idea that UKEF could assume a more prominent role on climate change among ECAs internationally through these policies. 
  • The recent move by the Government to phase out financing for fossil fuels and deepen the transition to renewable energy exports is likely to be supported by a significant percentage of exporting firms. Before the Government’s announcement in December 2020 that UKEF would phase out financing and support for fossil fuel projects, our polling found that a majority of UK exporting firms supported enacting the phase out within five years. Beyond the phase out, UK exporting firms are supportive of strengthening UKEF’s interventions in a range of policy areas relevant to climate change and domestic political economy, including the promotion of job creation in the renewable energy industry, protecting biodiversity, and assisting disadvantaged regions of the UK to ‘level up’ their economies.  

Our polling shows that three attributes of UK exporting forms are associated with varying views on UKEF: business size, business location and regions to which they export to. Business size and business location are frequently associated with a difference in views, while export regions are sometimes associated with a difference in views.

Differences across these characteristics are not fully consistent, though some minor trends can be observed. First, smaller firms tend to be more likely to hold views on UKEF which are neutral or not to hold views at all, indicating a lower degree of engagement. Second, firms located in London are slightly more likely to be supportive of action on climate. We cannot attribute a causal relationship between these attributes and holding these views, as they could be correlated to different attributes which are causally leading to this. 

Our polling of UK exporting firms reveals a strong mandate for UKEF to introduce policies to tackle climate change. Despite UKEF’s poor record on climate change policy to date, UK exporting firms want UKEF to play an important role in accelerating the climate transition, both within the UK and internationally. As we approach COP26, there is a chance for UKEF to recover its reputation and introduce climate change policies to make it a leader among international ECAs.

References

[i] UK Export Finance, “About us”, https://www.gov.uk/government/organisations/uk-export-finance/about, (2020), 1.

[ii] UK Export Finance, “Annual report and accounts 2019-2020”, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/895198/Performance_ukef-annual-report-and-accounts-2019-to-2020.pdf, (2019), 46.

[iii] UN Conference on Trade and Development, “Impact of COVID-19 on trade and development”, https://unctad.org/system/files/official-document/osg2020d1_en.pdf (2020), 8.

[iv] UK Office for National Statistics, “The impact of coronavirus (COVID-19) on exporting and importing by UK businesses: 20 April to 3 May 2020”, https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/theimpactofcoronaviruscovid19onexportingandimportingbyukbusinesses/20aprilto3may2020 (2020), 2.

[v] UK Export Finance, “Guidance: Coronavirus (COVID-19): finance for UK businesses trading internationally”, https://www.gov.uk/government/publications/coronavirus-covid-19-finance-and-insurance-support-for-exporters/coronavirus-covid-19-finance-and-insurance-for-exporters (2020), 1.

[vi] UK Parliament, “Research Briefing: Statistics on UK-EU trade (November 2020)”, https://commonslibrary.parliament.uk/research-briefings/cbp-7851/#:~:text=The%20EU%2C%20taken%20as%20a,2002%20to%2043%25%20in%202019 (2020), 1.

[vii] These countries are members of the Powering Past Coal Alliance, which has secured commitments from public development banks in 104 nations to end financing and insurance for coal project development. See: https://poweringpastcoal.org/about/who-we-are (2020).

[viii] Crescencia Maurer & Ruchi Bandari, “Climate of export credit agencies”, “https://www.wri.org/publication/climate-export-credit-agencies#:~:text=Reveals%20that%20export%20credit%20and,increases%20in%20greenhouse%20gas%20emissions (2000).

[ix] Perspectives Climate Group, “Study on external and internal climate policies for export credit and insurance agencies”, https://www.perspectives.cc/fileadmin/Publications/ECA_Study.pdf (2020), 2.

[x] HMT, “Budget 2020”, https://www.gov.uk/government/publications/budget-2020-documents/budget-2020.

[xi] Environmental Audit Committee, “Report on UK Export Finance: Summary,“ https://publications.parliament.uk/pa/cm201719/cmselect/cmenvaud/1804/180402.htm, (2019), 1.

[xii] Perspectives Climate Group, “Study on external and internal climate policies”, 25, 31.

[xiii] Environmental Audit Committee, “Report on UKEF”, 2.

[xiv] Emma Gatten & Gordon Rayner, “UK agrees $1bn backing to Mozambique gas pipeline despite environmental concerns”, The Telegraph, 26 June, 2020.

[xv] Caldecott, Ben, Elizabeth Harnett, Theodor Cojoianu, Irem Kok, and Alexander Pfeiffer, “Stranded assets: A climate risk challenge”, Inter-American Development Bank, https://lpdd.org/wp-content/uploads/2020/03/Stranded-Assets-A-Climate-Risk-Challenge.pdf (2016), 1.

[xvi] One caveat should be noted: the number of oil and gas firms included in our sample is low – around 1% of total.

[xvii] UK Export Finance, “Our products”, https://www.gov.uk/government/collections/our-products, (2020), 1.

Acknowledgements

This report has been made possible by the generous support of the European Climate Foundation. The ideas expressed in this publication do not necessarily reflect the views of our sponsors. 

I would like to extend my sincere thanks to Anvar Sarygulov for his help and feedback in editing this report. I would also like to thank Ryan Shorthouse for his assistance and guidance, and Dr Ben Caldecott (University of Oxford), Sam Hall (Conservative Environment Network), Astrid Manroth (European Climate Foundation) and Joseph Curran (Opinium) for reviewing and commenting on the paper. I would like to express my thanks to James Crouch and the Opinium team for their hard work and attention to detail on the polling.

The full data tables for the polling can be found here.