Are the new ECGD products required? - Business Works
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Are the new ECGD products required?

O ne of the Government's aims is to ensure that British exporters, especially SMEs, have access to trade finance and risk mitigation products to enable them to fulfill export orders where these are not available, or are insufficient, from private market sources.

"I welcome these initiatives which should give increased choice to UK businesses, notes there is no shortage of capacity in the credit insurance market at present and the ECGD could find themselves competing with the private sector," said Fabrice Desnos, Chief Executive of Euler Hermes UK. "Whilst it is true the availability of credit insurance contracted in the heat of the economic crisis - especially during the latter part of 2008 and first half of 2009 - which has been a very difficult time for businesses and insurers, the market has clearly recovered since 2010."

"There is plenty of capacity and appetite within the private sector to help British businesses trade successfully and safely in export markets," he says, "even in some of the more challenging countries""

At the end of December 2010, Euler Hermes UK was covering in excess of £25bn of short-term credit transactions on foreign buyers, up +11% on the same time last year and already above pre-economic crisis levels. "We have seen demand for export cover recover much quicker than for domestic transactions. It is a clear sign this is an area of growth for UK businesses which we are pleased to be able to support."

Fabrice also points out that ECGD will only provide short-term cover for single transactions outside of the EU and of the OECD and that cover will be restricted to certain trade sectors. "We welcome any government initiative that provides help to UK businesses but this measure only targets a very small proportion of UK exports," he says.

"The private insurance market is extremely dynamic, with new entrants coming and existing players widening their offer and improving their products. This is a very competitive marketplace which offers a range of products that is much wider than what the government is considering to offer through the ECGD." Euler Hermes UK has recently announced the launch of a new transactional cover unit which will offer bespoke insurance solutions for political risks, and medium term credit covering single transactions up to €75 million and up to a maximum risk period of 7 years.

"If the intention is to raise the profile of credit insurance as an essential tool in mitigating risk, then it is to be applauded, but we don't expect the measure being announced will have a significant impact. Whilst we recognise the market went through difficult times two years ago, it's hard to see why the government felt the need to introduce this now."

Fabrice Desnos can be contacted via:

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