What UKEF’s £14.5bn really tells us about UK Trade Strategy - Trade Treasury Payments

A new report from Britain’s export credit agency, UK Export Finance (UKEF), highlights its highest-ever support for exporters: £14.5 billion in guarantees, loans, and insurance, up from £8.8 billion the year before.

Launched last Thursday, the Annual Report states that 667 UK exporters were supported by UKEF, an apparent surge that UKEF credits with sustaining 70,000 jobs. 

Headline numbers also highlight £2.3 billion in “clean growth” financing and over £600 million directed to small and medium-sized enterprises (SMEs). 

UKEF even turned a £146 million profit for the Exchequer, reinforcing its mandate to operate at “no net cost to the taxpayer.” 

In this article, TTP takes a closer look at the numbers behind UKEF’s record-breaking year. Beneath the surface, shifts in deal structures and policy, from SME-focused messaging to large-scale defence finance, from expanded risk appetite to evolving climate disclosures, raise important questions about credibility, risk, and alignment with broader government goals.

Small print on UKEF’s SME and green figures

UK Export Finance (UKEF) is keen to cast itself as a catalyst for sustainable growth amongst SMEs. The report claims support for 667 exporters last year, of which 496 were small and medium-sized firms, “83% based outside London.” It also highlights £2.3bn in finance for “clean growth” projects, from solar farms in Turkey to offshore wind in Taiwan.

The headline numbers are impressive, but looking closer, only 376 exporters of all sizes received direct UKEF products. The rest were either indirect suppliers to larger UKEF-backed projects or participants in general export promotion activities. UKEF itself acknowledges, albeit in a footnote buried in the Annexes (p. 144), that “direct SME support remains a small portion” of its activity.

UKEF changed its counting methodology this year to include Tier 2 subcontractors, which has flattered its SME figures. 

A 2021 parliamentary inquiry warned that such reporting risks misinterpretation, and UKEF’s own advisory council has called for greater clarity.

Even among those SMEs receiving finance, the scale is modest. 

Just over £600m, less than 5% of UKEF’s £14.5bn portfolio, was issued directly to SMEs. 

Most other support was concentrated in a handful of big-ticket deals. While indirect benefits from large contracts can matter, it is difficult to quantify how much truly reaches the smaller firms in the supply chain.

The same applies to “clean growth.” UKEF’s £2.3bn in green-tagged finance spans projects with UK supply-chain involvement, but the actual domestic value-add may be smaller. 

Some transactions, such as financing more efficient aircraft for foreign airlines, stretch the definition of “clean.” The agency’s shift away from fossil fuels is real; since 2021, it has stopped backing overseas oil and gas, but emissions from legacy projects are still expected to rise before they fall.

UKEF has promised to double its SME reach by 2030, aiming for 1,000 customers a year. That will require more than statistics. It will likely mean new products, expanded credit risk appetite, and a focus on who really benefits from its support.

Guns and guarantees

Once known for backing power stations and trains, UK Export Finance (UKEF) is becoming a financier of missiles.

In 2024/25, Britain’s export credit agency underwrote £7.7bn for Poland’s air-defence programme, one of the largest deals in its history.

The financing, arranged under the National Interest Account (NIA), a mechanism allowing ministers to override UKEF’s usual risk parameters, accounted for more than half of all new business in the year.

Poland’s NAREW programme, developed with MBDA UK, initially breached UKEF’s country risk limits. Ministers responded by lifting the ceiling to £15bn. UKEF candidly notes that “owing to the size of the deal, [UKEF] incurs a contingent liability beyond [its] usual parameters,” necessitating ministerial sign-off. The support wasn’t even made public until after it was finalised (due to commercial sensitivity and geopolitical discretion).

Because it falls under the NIA, the exposure sits with HM Treasury, not UKEF’s usual capital base. A similar pattern applies to Ukraine. Despite war-driven credit risks, UKEF maintained a £3.5bn country limit there and guaranteed over £180m in deals, including nuclear fuel exports. More is coming: a £1.6bn missile financing package for Ukraine, announced by the Prime Minister in March, is expected to close in 2025/26.

Politically, this aligns with Britain’s strategic aims. Financially, it concentrates risk. With a single defence contract, UKEF’s European exposure jumped from 22% to 32%, and its defence-sector weighting rose from 8% to 13%. 

Poland’s A- sovereign rating is sound, but the size of the deal could raise questions. 

Should the borrower’s fiscal health deteriorate or the project falter, the liability falls to the taxpayer. 

Observers note that UKEF historically focused on big-ticket projects in a few sectors (energy, aerospace, etc.), and struggles to serve the breadth of exporters.

UKEF insists such risks are priced in, and that NIA deals generate “adequate income.” Nonetheless, the agency’s “no net cost” mantra, unbroken since 1991, may come under pressure.

Defence support is not without precedent: Parliament endorsed it in 2021 as part of UKEF’s diversification strategy. But the NIA allows deals to bypass some due diligence standards. In the case of NAREW, the agency notified Parliament’s oversight committees, none requested further information. That may suggest political consensus. It also suggests limited scrutiny.

There are trade-offs. UKEF’s capacity is finite, even if its statutory limit has been raised. Large defence transactions may crowd out smaller ones. Indeed, a clean energy credit line was quietly reallocated to accommodate defence lending. The agency says it can support both, and has pledged to double SME reach by 2030. But priorities are clear. In 2025, UKEF’s direct lending capacity will rise by £3bn, earmarked exclusively for defence.

The implications are manifold. For the Treasury, the risks are increasingly geopolitical. For trade financiers, UKEF is open for defence business as never before. 

One source told TTP, “It has always been difficult for financial institutions to lend directly into defence and security for compliance and financial risk reasons. The money now available in guarantees should provide the industry with assurances that defence is fundable in an era where our economic and defence and security face an existential threat. It is up to UKEF and the banks to work together to find new products that will deliver this finance since straight lending and trade finance will not provide the complete answer.”

Whether the strategy proves prudent will depend on how well and transparently these liabilities are managed.

Expanding the lending envelope

To support its larger role, UKEF’s financing capacity has been dramatically expanded. 

Its statutory ceiling, that is, the maximum value of loans and guarantees it can issue, was raised by £20bn in 2025, taking its total exposure limit to £80bn. 

At the same time, its Direct Lending Facility, through which it finances foreign buyers directly, was topped up to £13bn. Of that, £3bn has been earmarked for defence, while a previously ring-fenced £2bn for clean energy was quietly folded into the general pot.

The changes give UKEF unprecedented firepower. Proponents argue this is smart, strategic policy: with global competition for infrastructure and energy projects intensifying, Britain must keep pace with more aggressive export credit agencies such as Bpifrance, Korea Eximbank, or US EXIM. 

The agency insists that its expanded role will remain fiscally sound. It operates on a “no net cost” mandate, and its premium income surged to £428m last year, generating a net profit for the fifth year running. It stayed well below its exposure cap, with plenty of headroom for future transactions. In theory, this makes the capacity increase prudent: a pre-authorised buffer that allows swift action on large deals without returning to Parliament.

But some worry the buffer could become a backdoor to overreach. UKEF’s guarantees are contingent liabilities: they do not show up as spending today, but they are real fiscal risks. The Office for Budget Responsibility (OBR) has flagged such liabilities as material in the event of economic shocks. Should a borrower default or markets seize up, UKEF may face a surge in claims. Already, claims paid have begun to tick up again, £278m in 2024/25 (for comparison, it was £40m in 2021/22), possibly reflecting a post-pandemic tail.

The structure of UKEF’s risk appetite raises further questions. Smaller exporters, often seen as higher risk or less bankable, continue to account for a sliver of UKEF’s direct financing, less than 5% last year. Critics argue the agency could use its expanded envelope to accept thinner margins or riskier credit for SMEs, cross-subsidised by safer, premium-paying mega-deals. Instead, the bulk of new capacity seems destined for big-ticket sectors: energy, defence, and large infrastructure.

This may blur the line between commercial facilitation and industrial strategy. The £3bn earmarked for defence, just months after a separate £2bn increase in defence lending capacity, suggests a conscious tilt. The axing of the clean growth tranche has raised eyebrows. UKEF says this was to “improve flexibility” in deal-making, but others may see it as deprioritising green finance. 

The stakes are rising. For exporters, the expanded capacity is mostly welcome: more coverage, more flexibility, more syndication opportunities. For government, it means a bigger quasi-fiscal role with greater exposure to geopolitical risk. For taxpayers, it demands confidence that UKEF’s risk systems will keep pace. 

The report mentions enhanced governance, upgraded modelling, and close coordination with HM Treasury [UKEF Annual Report, Risk section, p. 115]. But the core tension remains: a balance between backing ambition and staying prudent. As one committee member put it, UKEF’s job is “ensuring no viable export fails”, not ensuring every risky export succeeds.

Cleaning up credit

Few export credit agencies (ECAs) have come under greater scrutiny over their environmental credentials than UK Export Finance. Once a financier of fossil-fuel megaprojects, UKEF is now keen to present itself as a vanguard of “clean growth” finance. The report is heavy with disclosures, many of them rare among its peers, including detailed estimates of financed emissions, scenario analysis, and early adoption of climate-aligned accounting standards.

UKEF claims it was the first ECA to publish portfolio-wide carbon data using a methodology tailored from the Partnership for Carbon Accounting Financials (PCAF). It has also joined the new Net-Zero Export Credit Agency Alliance (NZECA), launched at COP29, committing to science-based targets and net-zero alignment by 2050. Scenario models in the report simulate both orderly and disorderly climate transitions, while the agency stress-tests its portfolio against future climate risks.

By the standards of sovereign-backed lenders, this is ahead of the pack. An OECD survey in 2024 found that fewer than half of export credit agencies even referenced the Task Force on Climate-related Financial Disclosures (TCFD), though most intend to catch up. UKEF began publishing TCFD-aligned reports in 2021, well before many peers. It has also stopped supporting new fossil fuel projects abroad, one of the few ECAs to fully implement a ban, alongside several Nordic agencies. Some institutions, such as US EXIM, are still playing catch-up.

Much of this progress is structural. UKEF now embeds climate into its risk and governance systems. It discloses the transition and physical climate risks in its portfolio, and offers “natural disaster” clauses in loans to mitigate sovereign risk in vulnerable geographies. 

Legacy exposure remains an issue. Fossil fuel-linked assets still sit on UKEF’s books, creating potential transition risk even if no new oil or gas deals are approved. The agency admits these exposures will “increase before they decline,” as pre-ban projects reach disbursement. 

More broadly, there is the question of ambition. UKEF’s current headline climate commitment is to mobilise £10bn in “clean finance” by 2029. Unlike private financial institutions or development banks, it has yet to set a portfolio-level carbon intensity reduction goal. 

NZECA is expected to push its members to do so. Climate think tanks have argued this shift is necessary. According to Perspectives Climate Group, ECAs’ overall pivot toward renewables remains “slow and inconsistent,” and not aligned with the scale of decarbonisation required.

UKEF’s mandate adds tension. It must support “any viable UK export,” regardless of carbon content. Critics, including Parliament’s International Trade Committee, have urged a rethink: recommending the mandate explicitly integrate environmental and human rights standards. Without such a shift, difficult trade-offs remain. 

UKEF may, for instance, continue to finance “cleaner” aircraft for foreign airlines or critical mineral extraction, both activities with climate or environmental consequences, despite being tagged as green.

For financiers, UKEF’s climate strategy matters in practical terms. It is one of the few ECAs incorporating climate risk into underwriting decisions and credit ratings, rather than treating it as a reputational issue. Firms seeking support for carbon-intensive projects may face tougher due diligence. Those working in renewables or transition sectors may benefit from quicker processing and larger backing.

UKEF is right to claim leadership on disclosure. But transparency, while necessary, is not sufficient. A growing share of its portfolio is low-carbon, but so far its ambition is defined more by what it won’t support (fossil fuels) than what it actively prefers. That will need to change if it is to remain credible as a climate finance institution. Upcoming targets under NZECA will test whether ECAs like UKEF are truly steering their balance sheets toward 1.5°C pathways, or just painting them green.

Fit for the future?

UKEF is clearly scaling up, diversifying sectors, and leading on disclosure. For the export finance community, this opens up new pathways for syndication, risk-sharing, and ESG-aligned lending. But the concentration of support in a few politically strategic sectors raises valid concerns.

The agency’s credibility depends on its ability to balance ambition with prudence. Its risk framework must keep pace, and its stated goals, on climate, SME support, and additionality, must be more than branding.

In the year ahead, defence-related NIA activity, new impact indicators, and global scrutiny under NZECA will test whether UKEF’s expanded role can remain both accountable and aligned with UK values.