Weak Link or first line of defence? The role of UK Export Finance in fighting corruption in a post-coronavirus and post-brexit trade drive

2 minute read

Spotlight on Corruption is today releasing a major new report on the role of UK Export Finance (UKEF) in fighting corruption in the UK’s post-Brexit and post-coronavirus trade drive. UKEF is a government agency that provides taxpayer support to underwrite the majority of financial risk that UK companies face when exporting abroad.

UKEF is being called upon to play an enhanced role in the government’s trade drive. In particular, UKEF’s ability to make direct loans to foreign governments and bodies to buy UK goods was nearly tripled in the March 2020 budget.

Risky business

Spotlight on Corruption examined UKEF’s portfolio and we find that UKEF’s support for UK exporters is targeted at sectors prone to corruption such as infrastructure and defence in countries at high risk of corruption. We find that 11 out of 20 of UKEF’s priority markets rank in the bottom half of corruption indices.

Our report assesses the lessons from recent corruption scandals involving UKEF backed companies. We find that:

Transparency deficit

We go on to look in depth at UKEF’s anti-corruption procedures. We find that:

Red flags waving

Finally, we stress tested several recent transactions in Africa. We find that a majority (7 out of 11) of recent transactions supported by UKEF in Africa involve newly established subsidiaries of foreign companies with little economic activity in the UK. While we did not find instances of corruption, we found significant red flags which suggest high risk transactions. These include two recent transactions involving support for subsidiaries of Spanish companies that have been embroiled in corruption allegations and another transaction involving a company with political connections to the brother of the President in the country.

Spotlight on Corruption is calling on UKEF to significantly increase transparency about how it handles corruption risk and to bolster its anti-corruption defences so that it exports clean business around the world.

Photo by Pat Whelen (www.unsplash.com)