§ Mr. Michael Lathamasked the Secretary of State for Trade why access to buyer credit facilities is restricted by the ECGD to contracts of £1 million or over; what evidence is available to him that United Kingdom exporters wishing facilities for smaller contracts are able to find satisfactory alternative private sources: and for how long the £1 million maximum has been in existence.
§ Mr. MeacherAccess to buyer credit facilities is generally restricted by ECGD to contracts of £1 million and over for the following reasons: (a) there has been little demand for this facility for contracts below £1 million—less than one case per month over the past five years; (b) the buyer credit facility is relatively expensive to operate for exporters, bankers and ECGD, and hardly justifies the time and expenditure involved for contracts of less than £1 million; (c) there are adequate alternative means of obtaining export finance with ECGD support for contracts below £1 million through that Department's bank guarantee scheme; this is used by the great majority of insured exporters and is generally preferred for smaller contracts.
I have no reason to believe that adequate export finance facilities are not available to exporters from private sources through overdraft or discounting arrangements within the banking system, supported over a wide range of business by ECGD's bank guarantee scheme.
The minimum access figure for buyer credit facilities was increased to £1 million in February 1977, a lower figure of £1 million having previously been available since November 1971. As a result of inflation since that time this figure is no longer appropriate. There is no maximum access figure.
§ Mr. Michael Lathamasked the Secretary of State for Trade why the ECGD imposes a £1 million minimum contract value requirement for its preshipment finance guarantee; for how long this 593W minimum has been in existence; and what evidence is available to him that United Kingdom exporters wishing facilities for smaller contracts are able to find satisfactory alternative private sources.
§ Mr. MeacherThe ECGD preshipment finance facility is intended to help where a desirable export of major capital goods is put at risk through difficulties over the availability of production finance. For business of this nature the £1 million minimum contract value, which has been in force since the facility was introduced in August 1975, is reasonable. ECGD's experience of operating the facility has given no reason to believe that the limit is unduly restrictive. The facility, which does not reduce the cost of finance, is of limited application, its object being to supplement the availability of private finance. There is no evidence that adequate production financing facilities are not available for smaller scale business through normal banking channels.