Just Trade Newsletter - 14th June 2022

UK Export Finance named world’s 'best export credit agency' for sustainable finance

The government’s export credit agency, UK Export Finance (UKEF), is the world’s best agency for sustainable finance, it was announced at the TXF Global Export Finance Conference in Lisbon. The UK media seems to have totally ignored this story.

UKEF also won three industry accolades too, for its work supporting Renewables, Health and Rail Transport. Last year UKEF supported sustainable projects worth £3.6bn, 50 per cent growth on the £2.4bn it provided in 2020.

The new accolades were won after it pledged £210m pledge for wind turbines in Taiwan, £130m for six new hospitals in Côte D’Ivoire and a £1.1bn package of support for the construction of a 503km high-speed electric railway from Ankara to Izmir.

With the global market for low-carbon exports set to hit £2 trillion by 2030, there are some exciting opportunities for UK exporters. “The financial case for green trade is very clear,” said international trade secretary Anne-Marie Trevelyan.

“UKEF is focused on four key principles: building a green industrial base, boosting green exports, liberalising green trade and aligning our trade and environmental policies,” said Trevelyan.

However, UKEF has been criticised for favouring a select few companies. Global Trade Review claimed that nearly 90% of the £12.3bn of the support the export agency committed in 2020/21 went to just nine companies, with 92% of UKEF’s support in 2020/21 directed at just 10 countries. Qatar, Egypt and Mozambique received nearly two-thirds of the total.

The good news is that that UKEF is getting 20% more on its budget next year. It currently supports 549 UK businesses and 107,000 UK jobs. “2021 was the year where UKEF led the world of export finance into a more sustainable future,” said UKEF CEO Louis Taylor, “we will continue to use the power of our finance to make the world a better, more prosperous and sustainable place.”

Huge strides are being made on green trade initiatives, IOE&IT director general Marco Forgione told GB News: “but we are not there yet.”

UK’s SME Exporters told to audit their supply chain – majority has no contingency plan

New research from Aldermore has found that the supply chain crisis has affected half (54%) of the UK’s small and medium-sized enterprises (SMEs) in the last 12 months.

Labour shortages, Covid complications and Brexit trade barriers were the main causes of grief to the 2.1 million businesses that said they were affected. Supply chain issues reportedly increased costs (in 51% of cases), delayed crucial projects (48%) and made businesses miss opportunities for growth (37%).

A direct financial impact was experienced by 890,000 SMEs, costing an average of £881,196, creating a total cost of £3.9b in lost earnings for the wider UK SME business community. The hardest hit sectors were technology (89%), manufacturing (88%) and construction (77%), all of which must source raw materials to maintain their activities.

Nearly one in five UK SMEs (18%) anticipated that supply chain issues will persist as one of the main barriers to running their business for up to two years. Ian Wright, chief executive of the Food and Drink Federation, said some shortages may be here forever, with a permanent reduction in choice.

Despite its importance, few SMEs fully understand their supply chain and 38% admitted they only know their direct suppliers and customers. Two out of three business leaders (65%) have never conducted a supply chain audit or put a contingency plan in place. This lack of planning among SMEs vulnerable to supply chain problems that could be averted, according to Tim Boag, group managing director, business finance at Aldermore. “SME business leaders can benefit from a greater understanding of their suppliers and customers in order to gauge the challenges that might eventually have a knock-on effect on their own business,” said Boag.

Rory Walker, COO of Secureshield has struggled to source the specialist components needed to install electric charge points after the international chip shortage and global slowdown in component production.

“If someone asks you to do a job and you don’t have the people or the kit, you’re not left with much to get the job done,” said Walker. Aldermore claimed it helped Secureshield to navigate these challenges and is now working on its growth plans.

Air cargo declines at Heathrow says IATA – but it’s booming in Britain’s regional airports

The effects of Omicron in Asia and the Russia–Ukraine war continue to create a challenging operating backdrop that is driving the decline according to a report by the International Air Transport Association (IATA). Sea port congestion and rising shipping costs are not translating into a switch to air cargo transport, it says.

But there is one boom in the UK, according to a report in The Loadstar. Regional U K airports are seeing their solid cargo air offering booming. The specialist supply chain website reports that, from having almost no cargo in April 2020, Bournemouth Airport alone has seen 20,000 tonnes of goods passing through by the end of March 2022.

Congestion at larger hubs, such as London’s Heathrow, is pushing freight forwarders out to regional airports which are cheap, flexible and have the space to grow. “This means that we can be flexible to manage whichever aircraft, including widebody cargo-in-cabin operations, whenever the client needs it,” said Bob Matharoo, head of cargo at Bournemouth Airport, which is 90 minutes from London by road. This has brought major savings in time and costs, in the air, in consignment handling and on the highway, giving cargo shippers a strong supply chain advantage, said Matheroo.

Cargo First, for example, is the UK’s only full-service airport cargo operation offering a single contact point and flexible slots that can be altered to the market’s requirements. Its focus to date has been on e-commerce.

The overall time from aircraft touchdown to delivery to its London warehouse is significantly shorter than via the major hub airports, with all the major air importers and exporters based in and around London on its doorstep.

Bournemouth airport has established an on-site operator, European Cargo Limited, which now runs long-haul flights to and from Asia and North America from Bournemouth Airport. European Cargo operates a fleet of six A340 passenger converted cargo aircraft between Bournemouth, China and the US, handling, among other things, e-commerce related consignments. The airline has recently secured funds to continue aircraft conversions, with a planned in-service fleet of 10 aircraft by year end, said Matharoo. Bournemouth Airport also has other ad-hoc operators transiting cargo through Cargo First across the world.

In an unusual twist, Covid is driving trade. The rising demand for e-commerce is driving the surge in growth in cargo operations that were initially focused on bringing in a huge amount of PPE and Covid-19 testing kits. However, in the aftermath, this has now extended to support other industries, including time-sensitive goods.

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Volume of cargo booming in airports that London’s media don’t go, 50% of UK’s SME exporters say nobody yanks their supply chain and the government’s export finances are the best in the world.

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2022/06/14