The Department for International Trade (DIT) and UK Export Finance (UKEF) have made a good start in developing a strategy and operating arrangements to better support UK businesses in trading overseas but face significant challenges in boosting exports over the long term, according to today’s report by the National Audit Office.
DIT has primary responsibility for delivering the UK’s trade policy and works closely with UKEF, the UK’s export credit agency.1 Growing exports is an important element of government’s strategy to boost productivity and growth following the UK’s exit from the EU. DIT and UKEF will also play a key role in supporting economic growth following the COVID-19 pandemic. In 2019, the UK exported £701.2 billion of goods and services to overseas countries.
The government’s 2018 export strategy included an ambition to increase exports from 30 to 35% of GDP. However, today’s report questions the value of the ambition. The lack of a timeframe for the ambition and the existence of other factors that can affect export growth, some of which are outside of government’s control, make it difficult to hold DIT accountable for its progress.
UKEF and DIT both set targets for the value of exports they aim to support. DIT met its internal ‘exports wins’ target for the value of exports it supports, achieving £24.4 billion wins against a target of £20.91 billion. The export wins measure is a useful tool for incentivising staff because DIT can set sector and regional targets, align activities across its UK and overseas network, and track trends in performance. However, the measure has limitations because it focuses efforts on short-term export support rather than longer-term activities. DIT has improved the way it measures performance, but the report recommends it needs to do more to assess the impact of some of the longer-term support it provides.
In 2019-20, UKEF operated within all its financial limits and the controls set by HM Treasury to provide assurance that it does not expose taxpayers to excessive risk. UKEF narrowly missed its 2019-20 target on the value of export contracts it aimed to support, supporting £4.4 billion of export contracts against a target of £5 billion. It fell short of its target to directly support 500 customers, supporting 199 in 2019-20. A further 140 customers benefited as suppliers to UKEF-supported projects.
DIT is making early progress in addressing a gap in the data it holds on UK exporters. It needs good data to identify which of the 5.9 million UK businesses already export or have the potential to do so. DIT expects the forthcoming Trade Bill to support data sharing between DIT and HM Revenue & Customs, which will help DIT to identify UK exporters.2 DIT has good information on some well-established sectors of the UK economy, such as aerospace, but could improve its data on emerging sectors such as renewable energy.
To make the best use of its resources, DIT plans to target its bespoke support at larger businesses and to direct smaller businesses to its digital services. However, a recent DIT survey of its clients suggests that some services on its website are not meeting the needs of some UK businesses.3 DIT is currently developing its digital offer to include more specific guidance and an evaluation strategy to help it understand the costs of its digital services, how well they meet user need and where the gaps are.
There is scope for UKEF and DIT to work more closely together overseas. UKEF supported exports to 72 countries in 2018-19, but 80% of the value of these exports was concentrated in five countries. UKEF relies on DIT staff to help identify potential customers, but those who are not finance experts may lack the skills to promote export finance; to address this, it aims to increase the number of UKEF staff overseas and has introduced training for DIT staff.
DIT and UKEF are developing a new export strategy which will build on the 2018 strategy by reflecting the UK’s exit from the EU and the government’s economic response to COVID-19. The NAO recommends that this strategy should encourage DIT, UKEF and other departments to work closely to ensure that UK industry is ready to exploit emerging opportunities overseas. This should include a robust sector-based analysis of opportunities for UK exports and UK businesses’ capacity to deliver.