UK firms exporting to the EU face an increase in costs and border friction after the end of the Brexit transition period © Chris Ratcliffe/Bloomberg

British exporters will be given extra financial help by the government to encourage trade after Brexit and take advantage of new free trade agreements.

On Monday, ministers will announce a shake up of government export finance support for small businesses. 

Exporters will be able to apply for larger loans from the UK’s five high street banks backed by a partial state guarantee. This can be used to cover costs linked to exports but also to scale up business operations. 

The end of the Brexit transition period on December 31 will usher in a swath of new customs procedures and costs for firms exporting into the EU, regardless of whether the UK and EU agree a trade deal.

Officials hope the government backed loans will help thousands of businesses with multiple export contracts, pay for labour costs, build inventory and ease cash flow constraints.

Through its UK Export Finance (UKEF) arm — which is part of the Department for International Trade — the government will provide an 80 per cent guarantee on money from lenders to support general exporting costs.

Banks often have limited capacity to lend to businesses seeking export finance and tend to only offer financial support to cover individual contracts.

Graham Stuart, minister for exports, said the government was shaking up the support it provides for internationally focused companies to help bring new trading opportunities to businesses in the UK.

“The new [facility] will make a huge difference for entrepreneurs who need the financial backing to go global and benefit from our free trade agreements. It will help us bring genuine optimism back to exporters.”

The new facility will support a range of trade finance products including trade loans, bonds, letter of credit lines and invoice financing. The guarantee covers facilities up to £25m, with UKEF’s support no longer tied to individual export contracts. 

UKEF has more than doubled the amount that banks can automatically administer to an exporter through its facilities from £2m to £5m.

Established in 1919, UKEF aims to ensure that no viable UK export should fail for a lack of finance from the private market to win, fulfil and get paid for contracts.

Mr Stuart said the UK was the “only top ten exporting nation to grow exports last year . . . I’m determined for that success to continue as we recover from Covid-19.”

Financial support will be provided by HSBC, Lloyds Bank, NatWest, Santander and Barclays, the major providers of trade finance in the country, although it is hoped other lenders will sign up to the scheme.

Stephen Pegge, managing director of UK Finance, which represents the banking sector, said: “Supporting British exporters at this time is vital, which is why UK Finance and five of the main export lenders have been working closely with UKEF on the development of this new guarantee scheme.”

Mr Pegge said that this will give “businesses the confidence to win new contracts by having an agreed revolving facility in place”.

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