NU Online News Service, Jan. 18, 3:32 p.m. EST
An insurance industry official said the United Kingdom's government is failing exporters by refusing to underwrite bonds needed to win overseas orders by guaranteeing export contract performance.
Susan Ross, Aon Trade Credit director and chair of the British Exporters Association (BExA), said in a statement that the UK needs to copy European governments' actions and provide bond support to boost local exporters and lead the nation out of the recession.
Capital goods orders–such as aircraft, new manufacturing lines and equipment for telecommunications or power generation–regularly require a financial guarantee, known as a performance bond. This is issued by the company's bank to provide compensation if the equipment is not delivered on time or according to specification.
However, banks are rebuilding their balance sheets and taking a more cautious approach to lending. The banks will only agree to issue such bonds if they have sufficient capacity in their overall limit on the company.
Exporters are finding that banks are reaching their lending limits rather sooner than before the credit crunch. For example, one manufacturer lost a ?3.5 million (U.S. $5.72 million) export contract as it failed to secure the issue of a bond.
Government assistance is allowed under European competition laws and the UK's continental and North American competitors have access to bond support.
"At BExA, we have been aware for several years of the crucial nature of the support that is needed, which our continental European cousins have from their governments," she continued. "We have been lobbying government at every opportunity, but they just don't want to listen. This has to change," said Ms. Ross.
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