Submission to Business Innovation and Skills Committee
ECGD's role in promoting exports and credit to SMEs

by The Corner House

first published 24 September 2010

This Corner House submission to a Parliamentary Inquiry on "Government Assistance to Industry" (and on "Rebalancing the Economy") looks at how the Export Credit Guarantee Department (ECGD) promotes exports and supplies credit to small- and medium-sized enterprises (SMEs).

The Business Innovation and Skills Committee of the UK Parliament (appointed by the lower House of Commons to examine the administration, expenditure and policy of the Department for Business, Innovation and Skills (BIS) and its associated public bodies) held an Inquiry in 2010 into "Government Assistance to Industry". This inquiry considered:

  • the role of UKTI and the Export Credit Guarantee Department in promoting inward investment and exports; and
  • the role of the Government in encouraging the supply of credit to small and medium-sized enterprises.

This submission casts doubt on ECGD claims to operate at no cost to the taxpayer (a legal requirement) because ECGD uses an "off balance sheet" Special Purpose Vehicle (GEFCO) that serves to hide its losses and reduce its operating costs. The extent of the subsidies effectively given to exporters has been substantially underestimated and should be investigated.

The bulk of ECGD support goes to large, profitable companies able to obtain insurance and credit on the open market, not to small- and medium-sized exporters. ECGD should be required to disclose the difference between the premiums it charges and available commercial rates.

ECGD's weakening of its environmental, social, human rights and anti-corruption due diligence will damage rather than assist exporters' prospects and have adverse impacts, particularly its abandonment of its absolute ban on supporting projects involving child and forced labour. Lower standards will leave many companies unprepared to take advantage of growing markets for "green" goods and services.

ECGD should be incorporated into a dedicated Green Investment Bank as part of a wider industrial strategy aimed at building a low-carbon economy in the UK.

The Committee concluded in February 2011 that whatever the Department for Business, Innovation and Skills (BIS) does will be of "little consequence if business does not get access to sufficient levels of working capital."

The Committee subsequently launched another Inquiry into "Rebalancing the Economy: Trade and Investment", which aimed to explore the effectiveness of the Export Credit Guarantee Department and the flow of trade credit, and included this Corner House submission to this second Inquiry. Amnesty International UK, Campaign Against Arms Trade, Jubilee Debt Campaign and Worldwide Wildlife Fund also submitted written evidence to the Inquiry.