The Budget: Trade lobby wins extra cover: Export Credits

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THE Chancellor's announcement of extra export credit cover and lower insurance rates marks a resounding victory for the trade lobby over the Treasury.

The Export Credits Guarantee Department, the state-owned agency that insures capital goods exporters against non-payment, is being allowed to increase its cover by pounds 1.3bn over the next three years on 12 markets where potential profitability and risks are high. These are China, Hong Kong, India, Indonesia, Kuwait, Malaysia, Mexico, Oman, Singapore, South Africa, Turkey and Zimbabwe. Part of the pounds 1.3bn could also be channelled into fast-growing markets such as Thailand and Taiwan.

British exporters have been successful in many of these, and have been increasingly frustrated that they have been unable to obtain insurance. Although the Chancellor announced an extra pounds 700m of cover in his Autumn Statement, the complaints continued, boosted by the news in February that ECGD had run out of cover on the Indonesian market.

ECGD will also cut its premium rates by an average of 7.5 per cent. This follows a 20 per cent cut last April and will, Mr Lamont said, bring rates down to the average charged by other such agencies. The cuts will probably also be concentrated on fast- growing high-risk markets, where ECGD's premium rates are furthest out of line. It charges 8 to 10 per cent on a typical Indian risk, for example, compared with the 2 per cent charged by France's CoFace.

Both moves signal a climbdown by the Treasury, which has long argued that ECGD's loss record proves that it is no more than a sink for taxpayers' money. Two years ago, ECGD was forced to increase premium rates massively on riskier markets. There was an immediate outcry.

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