NAO reviews government support for exports

ICAEW 20 July 2020: National Audit Office gives a moderately positive report on government support provided to UK exporters.

The National Audit Office (NAO) has issued a report scrutinising the Department for International Trade (DIT) and UK Export Finance (UKEF) strategy for supporting British exports. These amounted to £701bn of goods and services in 2019, equivalent to 31.7% of GDP.

The UK Government’s ambition is to promote industrial growth by increasing exports from 30% to 35% of GDP, with DIT and UKEF expected to play a key part in achieving this goal. This is part of the overall ‘Global Britain’ strategy for the UK economy following the UK’s imminent departure from the European Union.

The NAO’s last report in 2013 concluded that the then ambition of increasing exports to £1tn by 2020 (which was not achieved) would require better coordination between the Foreign & Commonwealth Office and UK Trade & Investments (now part of DIT) and the setting of tough, measurable milestones. It makes the same point in this report, with better coordination required between DIT, UKEF and other government departments if the export strategy is to be achieved.

In 2018, DIT set out its initial strategy for increasing exports but the NAO says that it will need to be kept up to date to ensure long-term value for money. In particular, the strategy will need to adapt depending on the trade arrangements in place after the UK leaves the EU Single Market and Customs Union at the end of the year, as well as addressing the impact of the coronavirus pandemic on UK and global trade.

DIT is focusing on around 230,000 businesses with turnover greater than £500,000. 

The NAO criticises the evidence underlying the strategy to increase exports to 35% of GDP, saying it is not clear how stretching such an ambition is, nor is the timetable in which the target is expected to be achieved clear. 

The NAO is also critical of the lack of sufficient data on which of the 5.9 million businesses in the UK make exports or have the potential to become exporters. Better insights are needed, with, for example, greater understanding about emerging sectors such as renewable energy. The ability to expand exports into new areas needs to be explored.

A start has also been made by DIT on digital services to provide export support, but a full pilot service will not be in place until April 2021. 

The overseas networks of DIT and UKEF staff need to work more closely together to avoid missing export opportunities. DIT has 1,400 staff overseas but not all have finance expertise or the technical skills necessary to promote export finance effectively, and while UKEF supported exports to 72 countries, 80% of the value of these exports was concentrated in just five of them. 

The report also explores barriers to exporting, indicating that DIT lacks capacity to resolve all market access barriers. Access to finance can also be a barrier, despite the financial support provided by the UKEF. UKEF is developing new products and working methods to help in this respect, for example by providing greater delegated authority to five banks who can apply for some UKEF products to get immediate cover for exporters.

The report concludes that overall a good start has been made but there are massive challenges for both DIT and UKEF in the months ahead.

Commenting on the report Alison Ring, director for public sector at ICAEW, said:

“The National Audit Office has again highlighted the need for better coordination within government if greater success in exporting is to be achieved. Effective government support will be increasingly important following the UK’s departure from the EU.

More and higher quality data will be essential in developing insightful and focused policy, a recurring theme across government.”

This article was originally published by ICAEW.

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