Departmental Overview, November 2018

Department for International Trade and UK Export Finance If you would like to know more about the National Audit Office’s (NAO’s) work on the CONTENTS Department for This overview summarises the work of the Department for International Department for International Trade and UK Export International Trade Trade and UK Export Finance including what the organisations do, how Finance, please contact: much they cost, recent and planned changes, and what to look out for (DIT) and UK Export For the Department for International Trade across their main business areas and services. Finance (UKEF) Neil Sayers, Director, Influencing and Regulating [email protected] Bookmarks 020 7798 7536 Part One The OverviewDepartment for International Trade About the Department for International Trade Charles Nancarrow, The Department for International Trade’s performance against objectives Director, Influencing and Regulating Where the Department for International Trade spends its money DIT and UKEF (the UK’s export credit agency) are separate government [email protected] Managing public money: DIT’s budget and planned spend Relevant events and developments departments. Their funding is approved separately by Parliament through separate 020 7798 7399 Developing an international trade policy for the UK estimates and they submit separate annual reports and accounts to Parliament. A new department Exiting the European Union For UK Export Finance Supporting inward investment and exporting companies However, they are structurally connected, as they share a Secretary of State, and Hilary Lower, AccountabilityDepartment to Parliament for International Part Two – UK Export Finance the chair and chief executive of UKEF both sit on DIT’s Board. They also work Director, Influencing and Regulating Trade and UK Export Finance About UK Export Finance together closely in supporting UK businesses. Role in support to exporting companies [email protected] Financial controls 020 7798 7450 Where UKEF support goes

If you are interested in the NAO’s work and support PART ONE PART TWO for Parliament more widely, please contact:

The Department for International Trade UK Export Finance [email protected] 020 7798 7665

The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund, nationally and locally, have used their resources efficiently, effectively, and with economy. The C&AG does this through a range of outputs including value-for-money reports on matters of public and UK Export Finance Department for International Trade | interest; investigations to establish the underlying facts in circumstances where concerns have been raised by others or observed through our wider work; landscape reviews to aid transparency; and good‑practice guides. Our work ensures that those responsible for the use of public money are held to account and helps government to improve public services, leading to audited savings of £741 million in 2017.

Design & Production by NAO External Relations DP Ref: 11776-001 Departmental Overview 2018

© National Audit Office 2018 2 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS About the Department for International Trade 1/10 About the Department for International Trade The Department for International Trade (DIT) is the UK government’s international economic department responsi- Theble for bringing Department together policy, promotion for andInternational financial expertise to breakTrade down (DIT) is the barriers to trade and investment and help businesses succeed, delivering a new tradeUK policy government’s framework for the UK as it internationalleaves the European Union. economic department DIT works with other departments to support its mission responsibleDIT was established in July for 2016. bringing The new Department together took over responsibility policy, promotion and for the UK’s trade policy (excluding the negotiations over an agreement with the financialEuropean Union), promoting expertise opportunities to to invest break in the UK fromdown overseas, barriers and to trade and promoting exports. investmentThis meant that DIT took andover functions help from businessespredecessor government organisasucceed,- delivering tions, including: DExEU: absorbinga new the wholetrade of the policyformer UK Trade framework and Investment; for the UK as it leaves Support and the Europeanthe Export Control Joint Unit, whichUnion. includes the Export Control Organisation expertise for EU (from the Department for Business, Energy & Industrial Strategy (BEIS)) sup- UKEF: negotiations plemented by expertise from the Foreign & Commonwealth Office and Ministry Cooperating to HMT of Defence; help UK trade and Financial services the GREAT campaign (to enhance the UK’s standing overseas) from the Cabinet investment Office; and DIT was established in July 2016. The new trade policy from BEIS. a diagram showing how DIT worksDepartment with other departments took to support over its responsibility for the mission UK’s trade policy (excluding the negotiations BEIS and HMT: Cabinet Office: over an agreement with the European Union), Input into wider Devolution issues promoting opportunities to invest in the UK from overseas, economic policy and promoting exports. This meant that DIT took over functions from predecessor government organisations, including: HMT and Department • absorbing the whole of the former UK Trade IPO: Intellectual HMRC: Customs for International and Investment; property issues and tariffs Trade • the Export Control Joint Unit, which includes the Export Control Organisation (from the Department for Business, Energy & Industrial Strategy (BEIS)) supplemented by expertise from the Foreign & FCO and HMT: DFID: Trade for Economic Commonwealth Office and Ministry of Defence; development diplomacy • the GREAT campaign (to enhance the UK’s standing overseas) from the Cabinet Office; and DHSC/MHRA: Defra: • trade policy from BEIS. Pharmaceuticals Agriculture, regulation chemicals and UK Export Finance Department for International Trade DCMS: and WTO | Digital trade Note 1 DExDU – Department for Exiting the European Union; HMT – HM Treasury; FCO – Foreign & Commonwealth Office; Defra – Department for Environment, Food & Rural Affairs; DCMS – Department for Digital, Culture, Media & Sport; HMRC – HM Revenue & Customs; BEIS – Department for Business, Energy & Industrial Strategy; WTO – World Trade Organization; DHSC – Department of Source: Comptroller and Auditor General, Implementing the UK’s Exit from the European Union: The Department for International Trade,

Health & Social Care; MHRA – Medicines and Healthcare products Regulatory Session 2017–2019, HC 713, National Audit Office, January 2018, p. 26 Departmental overview 2018 Agency; UKEF – UK Export Finance; IPO – Intellectual Property Office 3 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS The Department for International Trade’s performance against objectives 2/10

To support and encourage UK businesses to drive sustainable Use trade and investment to underpin the government’s agenda for a international growth Global Britain and its ambitions for prosperity, stability and security DIT reported £30.5 billion of export wins in 2017-18. This figure is not comparable worldwide toThe dataDepartment for for 2016-17International Trade’s due performance to changes against objectives in how these data are validated. Export wins, a In 2017-18 ministers undertook 76 visits compared with 83 visits undertaken To support and encourage UK businesses to drive sustainable international growth metricDIT reported developed £30.5 billion of export by wins DIT in 2017-18. to measure This figure is itsnot comparableactivity, to datais forthe 2016-17 value due toof the deals that DIT has in 2016‑17. The GREAT Britain campaign was involved in 144 countries in both assistedchanges in how businessesthese data are validated. in Exportmaking wins, a metricoverseas developed byfor DIT theto measure next its activity,five is theyears. value Businesses report 2016‑17 and 2017-18. of the deals that DIT has assisted businesses in making overseas for the next five years. Businesses report this value thisto DIT. value to DIT. There were 30 trade envoys in 2017-18 who conducted 52 overseas visits. In 2016‑17, 20 trade envoys conducted more than 50 overseas visits. ThereEnsure the UKwere remains 30 a leading trade destination envoys for international in 2017-18 investment and who maintains conducted its number one position52 overseas for visits. In 2016international investment‑17, 20 stock trade in Europe envoys conducted more than 50 overseas visits. DIT supported 1,682 inward investment projects in 2017-18. This figure is not comparable to data for 2016-17 due to changes in how these data are validated. Build DIT as an effective international economic department where our Use trade and investment to underpin the government’s agenda for a Global Britain and its ambitions for prosperity, stability and security worldwide people are expert, enterprising, engaged and inclusive In 2017-18 ministers undertook 76 visits compared with 83 visits undertaken in 2016‑17. The GREAT Britain campaign was involved in 144 countries in both 2016‑17 and 2017-18. In its annual report, DIT reports that it has delivered capability programmes for staff EnsureBuild DIT as an effectivethe UKinternational remains economic department a leading where our peopledestination are expert, enterprising, for engagedinternational and at all levels and supported the establishment of the trade faculty. inclusive investmentIn its annual report, DIT reportsand that maintains it has delivered capability its programmes number for staff one at all levels position and supported for the international establishment of the trade faculty. investmentOpen markets, building astock trade framework in withEurope new and existing partners which is free and fair In its annual report DIT reports that it has created the Trade Remedies Authority, is working to transition to the UK’s DITindependent supported membership of 1,682 the World Tradeinward Organization investment and has engaged withprojects more than 70 in countries 2017-18. to secure This figure is not high-level political agreement to ensure continuity in existing trading relationships. Open markets, building a trade framework with new and existing comparableSource: Department for to International data Trade,for 2016-17Annual Report anddue Accounts to changes2017-18; Single in Departmental how these Plan (updated data are validated. 23 May 2018) partners which is free and fair In its annual report DIT reports that it has created the Trade Remedies Authority, is working to transition to the UK’s independent membership of the World Trade Organization and has engaged with more than 70 countries to secure high-level political agreement to ensure continuity in existing trading relationships.

Source: Department for International Trade, Annual Report and Accounts 2017-18; Single Departmental Plan (updated 23 May 2018) Department for International Trade and UK Export Finance Department for International Trade | Departmental overview 2018

4 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Where the Department for International Trade spends its money 3/10

1 DIT spent £372 million in 2017-18. It generated income DIT Spend by operating segment of £34 million in addition to this. The figures on this page reflect expenditure net of any income received.

Of DIT’s £372 million expenditure, DIT spent 47% on international trade and investment and 12% on the overseas network it International trade maintains around the world. DIT employs staff in embassies and and investment consulates who provide expertise and local knowledge about £176m overseas markets. Where the Department for International Trade spends its money DIT spent £372 million in 2017-18. It generated income of £34 million in addition to this. The figures on this page reflect ex- penditure net of any income received. Marketing and of the budget was spent on marketing the UK overseas,Of DIT’s £372 million expenditure, DIT spent 47% on international trade and investment and 12% on the overseas network communications 15% it maintains around the world. DIT employs staff in embassies and consulatesGREAT who provide Britain expertise and local knowledge £54m including the GREAT Britain campaign. about overseas markets. 15% of the budget was spent on marketing the UK overseas, including thecampaign GREAT Britain campaign. £3m 13% was spent on the Trade Policy Group and Ministerial and International Strategy. 13% of the budget was spent on corporate services, digital and estates. DIT’s income primarily consisted of income from fees for the Pan‑American Games 2019 in Lima and income from the lease was spent on the Trade Policy Group and Ministerialof 55 Whitehall. and Other income includes charges for events, sponsorships and the overseas market introduction service. 13% International Strategy. A diagram showing DIT Spend by operating segment. Overseas Estates platforms £4m £44m of the budget was spent on corporate services, digital Total expenditure 13% and estates. £372m

DIT’s income primarily consisted of income from fees for the Pan‑American Games 2019 in Lima and income from the lease of 55 Whitehall. Other income includes charges for events, Ministerial and sponsorships and the overseas market introduction service. International Strategy Trade Policy Group £13m £34m

Digital data and UK Export Finance Department for International Trade

Corporate services | and technology £22m £22m

1 The £372 million expenditure quoted here differs from spend against Department for Note International Trade’s budget as disclosed in the main estimates and on page 6. This is due 1 The fi gures for expenditure in this table are net of income received. to differences between accounting and budgeting treatment of some types of expenditure. Departmental overview 2018 The totals are reconciled on page 120 of the Department for International Trade, Annual Source: Department for International Trade, Annual Report and Accounts 2017-18 Report and Accounts 2017-18. 5 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Managing public money: DIT’s budget and planned spend 4/10

Department for International Trade’s resource budget 2016 to 2019 Departmental underspend in 2017-18 DIT’s budget rose over the past three years DIT spent £381 million1 against a budget of £394 million2 in 2017-18. DIT reported that the £14 million underspend was due to “slower than anticipated recruitment” in Budget (£) the Trade Policy Group and that £4.5 million was “ring-fenced” for EU exit but not 500,000 spent at the end of the year. 450,000 431,600 Note Managing public money: DIT’s budget and planned spend 1 The £381 million expenditure quoted here differs from the £372 milion expenditure on page 5. Departmental underspend in 2017-18. 400,000 74,000 The Department This is due to differencesDIT spent between£381 million accountingagainst a budget andof £394 budgeting million in 2017-18. treatment DIT reported of some that types of expenditure. has requested an 394,492 The totals are reconciledthe £14 million on page underspend 120 ofwas the due toDepartment “slower than anticipated for International recruitment” in Trade, the Annual Report and additional £74 million Accounts 2017-18. Trade Policy Group and that £4.5 million was “ring-fenced” for EU exit but not spent 350,000 at the end of the year. in 2018-19 for EU exit 2 The £394 million budgetNote covers running costs. In addition, DIT had a capital budget of £19.1 million 344,653 work. The Permanent in 2017‑18, of whichThe it £381spent million £15.8 expenditure million. quoted here differs from the £372 milion expenditure 300,000 Secretary told the on page 5. This is due to differences between accounting and budgeting treatment of Committee of Public Source: Department forsome International types of expenditure. Trade, The totals Annual are Report reconciled and on page Accounts 120 of the Department2017-18 for International Trade, Annual Report and Accounts 2017-18. Accounts on 7 March The £394 million budget covers running costs. In addition, DIT had a capital budget of 250,000 2018 that DIT is £19.1 million in 2017‑18, of which it spent £15.8 million. planning for “different Source: Department for International Trade, Annual Report and Accounts scenarios” which 2017-18 200,000 Department for InternA pieationa chart showingl Trade the Departmentexpenditur for Internationale, by ca Tradete gorexpenditure,y (201 7-18) 357,600 require “different by category (2017-18) numbers of staff”. Most of DIT’s budget is consumedAlso, a bar chart by showing staff thecosts, Department outsour for Internationalced services Trade’s and fees paid to other 150,000 government departmentsresource budget 2016 to 2019. 100,000 Events Promotion activity 6% 6% 50,000

0 2016-17 2017-18 2018-19 Fees paid to other government departments Staff costs Additional budget 12% 40% 2018-19 main estimate

Notes

1 For 2018-19 the main estimate is shown in yellow. The Department stated in its 2017-18 annual report and and UK Export Finance Department for International Trade Outsourced activity accounts that it will request an additional £74 million for EU exit work in the 2018-19 supplementary | estimates. This additional amount in shown in red. 16% Other 2 The Department received £6.3 million of additional capital funding in 2016-17, 19.1 million in 2017-18 and 20% will have £3.5 million in 2018-19.

Source: Department for International Trade, Main estimates 2018-19, Annual Report and Accounts 2017-18 Source: Department for International Trade, Annual Report and Accounts 2017-18 Departmental overview 2018

6 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Relevant events and developments 5/10

27 Mar 2017 7 Nov 2017 Feb 2018 to Jul 2018 Oct 2018 Antonia Romeo Trade Bill first reading in the Nine new Her Majesty’s Trade Publication of most appointed House of Commons. The Bill is Commissioners appointed to recent version Permanent currently in committee stage in lead UK trade and investment of DIT’s Single Secretary the House of Lords. activity across the world Departmental Plan

A flow chart showingRelevant events and developments

Nov 2016 20 Nov 2017 Aug 2018 29 Mar 2019 Launch of the website great. Taxation (cross-border trade) Publication of Date on which gov.uk, a single platform for Act first reading in the House of the UK’s Export the UK leaves the UK exporting companies Commons. The Act received royal Strategy European Union per assent on 13 September 2018. the Article 50 process

2016 2017 2018 2019

Jul 2016 10 Aug 2017 29 Mar 2018 July 2018 Department for Crawford Falconer appointed as National Trade Academy New consultations published for International Trade Chief Trade Negotiation Adviser Programme launched four trade deals (with US, New established and Second Permanent Secretary Zealand, Australia and CPTPP)1

Oct 2017 1 May 2018 Publication of Preparing for The ‘International Trade Profession’ is launched our future UK trade policy to develop trade expertise across government

Establishing the new Department and appointing personnel 29 Mar 2018

Publication of policy and strategy Secretary of State for International Trade, and UK Export Finance Department for International Trade | Parliamentary process Dr Liam Fox MP, issues ministerial direction to spend money on Trade Remedies Authority Progress towards delivering UK trade policy

Note 1 CPTPP = Comprehensive and Progressive Agreement for Trans-Pacifi c Partnership. Departmental overview 2018

7 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Developing an international trade policy for the UK 6/10

In October 2017, DIT published Preparing for our future UK trade policy. The document set out the five components of the UK’s approach to its trade policy.

Developing an international trade policy for the UK In October 2017, DIT published Preparing for our future UK trade policy. The document set out the five components of the UK’s approach to its trade policy. Trade that1. is transparent Supporting a rules- Boosting our Supporting developing Ensuring a level Trade that is transparent and inclusive and inclusiveThe government committed to consulting with Parliament,based the devolvedglobal legislatures trading and administrations, the Crown Detrade relationships- countries to reduce playing field pendencies, Gibraltar, local government, civil society, trade unions, businesses and the public in forming its trade policy. Accountability to Parliament is discussed on pageenvironment 12 of this Departmental Overview. poverty 2.

Supporting a rules-based global trading environment The governmentThe government committed committed to intensifying the UK’sThe support government for robust and free andcommitted open international trade rules andThe to government is The government is The government is rebuilding momentum for trade liberalisation. to consultingThis withincludes Parliament,a commitment to remain part of theto World intensifying Trade Organization’s the Government UK’s Procurement Agreement. Thecommitted to ensuring committed to putting in place committed to having a trade government has also said that it will be prepared to participate in other plurilateral arrangements. the devolved3. legislatures support for robust and continuity in its current trade a system of unilateral trade remedies system in place by and administrations,Boosting our trade relationships the free and open international and investment relationships, preferences which will, at a the time the UK requires it, The government is committed to ensuring continuity in its current trade and investment relationships, including those Crown Dependencies,covered by European Union (EU) third country Freetrade Trade Agreements rules and and other to EU rebuilding preferential arrangements. including those covered minimum, provide the same and a trade disputes system. Gibraltar, localThe government government, is committed to seeking opportunitiesmomentum to pursue an ever for more trade ambitious free trade agenda. by European Union (EU) level of access as the current 4. civil society,Supporting trade developing unions, countries to reduce povertyliberalisation. third country Free Trade EU trade preference scheme. The government is committed to putting in place a system of unilateral trade preferences which will, at a minimum, businessesprovide and the the same public level of access in as the current EU trade preference scheme. Agreements and other EU forming its Thetrade government policy. is committed to working closelyThis with DIT includes to offer a fully integrated a trade and development policy. preferential arrangements. The government is 5. commitment to remain committed to working Ensuring a level playing field AccountabilityThe government to Parliament is committed to having a trade remediespart of system the in placeWorld by the Tradetime the UK requires it, and a trade The government is closely with DIT to offer a is discusseddisputes on system.page 12 of Organization’s Government committed to seeking fully integrated trade and this Departmental Overview. Procurement Agreement. opportunities to pursue an development policy. The government has also ever more ambitious free said that it will be prepared trade agenda. to participate in other plurilateral arrangements. Department for International Trade and UK Export Finance Department for International Trade | Departmental overview 2018

8 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS A new department 7/10

DIT was created by merging elements of several government organisations. Department for International Trade staff overseas network, by region DIT stated in its annual report 2017-18 that “ensuring complete, accurate 1 (December 2017) and consistent data Aon new departmentits workforce has been a challenge” due to “inherited DIT was created by merging elements of several government organisations. DIT stated in its annual report 2017-18 that legacy issues”. “ensuring complete, accurate and consistent data on its workforce has been a challenge” due to “inherited legacy issues”. International region DIT headcount Staff changes Europe 307 We reported that DIT initially employed 2,504 staff in June 2016 Staff changes As at 31 May 2018, the Department disclosed 3,781 staff worked on DIT objectives Asia Pacific 215 A table showing new senior appointments. This second table shows the Department for International Trade staff overseas network, by region (December 2017 China and Hong Kong 196 We reported that that DIT DIT AsBy atOctober 31 May 2017,2018, the the As at 31 May 2018, the initiallyinitially employed employed Department disclosedDepartment had grown Department disclosed North America 180 2,504 staff to 3,745 staff 3,781 staff worked on 2,504 3,781 DIT objectives Latin America and the Caribbean 132 Middle East 116 staff staff South Asia 114 in June 2016 worked on DIT objectives Africa 85

Eastern Europe and Central Asia 71

New senior appointments Total 1,416 Note Appointment Date 1 The data refer to DIT’s staff overseas in embassies and consulates and excludes DIT’s domestic staff who are working in the UK. The data relate to staff in position as at 31 December 2017. Antonia Romeo Permanent Secretary 27 March 2017

Crawford Falconer Chief Trade Negotiation Adviser and Second 10 August 2017 Permanent Secretary

Catherine Vaughan Director General and Chief Operating Officer 4 September 2017

John Mahon Director General Export 23 April 2018 Department for International Trade and UK Export Finance Department for International Trade

Mark Slaughter Director General Investment 20 June 2018 |

In addition, the Department appointed nine HM Trade Commissioners between February and July 2018, and reorganised its overseas network into geographical regions led by them (as listed in the table opposite).

Source: Department for International Trade, Annual Report and Accounts 2017-18 Departmental overview 2018

9 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Exiting the European Union 8/10

DIT was formed in July 2016, in response to the EU referendum result and the UK’s decision to exit the European Union. It has overall responsibility for promoting British trade across the world, including preparing for and then negotiating Free Trade Agreements and market access deals with non-EU countries. The National Audit Office’s (NAO’s) January 2018 report on DIT’s preparedness for EU exit sets out DIT’s progress including planning for different EU exit scenarios, securing additional funding from HM Treasury and identifying areas where it can reduce some activities to focus more effort on EU exit work.

Exiting the European Union DIT was formed in July 2016, in response to the EU referendum result and the UK’s decision to exit the European Union. It has overall responsibility for promoting British trade across the world, including pre- paring for and then negotiating Free Trade Agreements and market access deals with non-EU countries. The National Audit Office’s (NAO’s) January 2018 report on DIT’s preparedness for EU exit sets out DIT’s Exitingprogress including the planningEuropean for different EUUnion exit scenarios, work securing streams additional funding ledfrom HM by Treasury DIT at April 2018 Finance and identifying areas where it can reduce some activities to focus more effort on EU exit work. As at April 2018, DIT was leading on nine of the exiting the European The government allocated £74 million for 2018-19 to DIT to help prepare for EU exit. Union work streams.Exiting the European Union work streams led by DIT at April 2018 DIT announced in its 2017-18 annual report that it would request these additional As at April 2018, DIT was leading on nine of the exiting the European Union work streams. These cover both current EU trade and future trade agreements, multilateral trade policy, trade remedies resources as part of the supplementary estimates process. Theseand disputes, cover export both control, currentunilateral preferences EU trade and tariff andarrangements future after tradethe UK has agreements, left the EU. multilateral trade Specific examples include: creation of the Trade Remedies Authority, which will investigate complaints of policy,unfair trading trade practices remedies affecting UK industryand post-EUdisputes, exit; achieving export transition control, at the World Tradeunilateral Organi- preferences and tariff arrangementszation (WTO); securing after independent the UK UK membership has ofleft the Agreementthe EU. on GovernmentSpecific Procurement; examples and include: creation of the securing continuity of the EU’s existing Free Trade Agreements and Economic Partnership Agreements. TradeLegislation Remedies Authority, which will investigate complaints DIT’s legislative programme includes trade issues covered in the European Union (Withdrawal) Act, the of unfairSanctions andtrading anti-Money practices Laundering Act, theaffecting Trade Bill, the UKTaxation industry (Cross Border post-EU Trade) Act. exit; Challenges for the Department achievingFinance transition at the World Trade Organization (WTO); The government allocated £74 million for 2018-19 to DIT to help prepare for EU exit. DIT announced in The NAO’s January 2018 report on DIT’s preparations for EU exit identified a number securingits 2017-18 independentannual report that it would UK request membership these additional resources of the as part Agreement of the supplementary of challenges, facing the department at that time, including: on estimatesGovernment process. Procurement; and securing continuity of theChallenges EU’s forexisting the Department Free Trade Agreements and Economic • that “developing specialist trade skills will be particularly challenging” and that The NAO’s January 2018 report on DIT’s preparations for EU exit identified a number of challenges, Partnershipfacing the department Agreements. at that time, including: DIT is in competition with other departments for finite staffing resources. In that “developing specialist trade skills will be particularly challenging” and that DIT is in competition with particular, the report noted that the “civil service model of moving staff every few other departments for finite staffing resources. In particular, the report noted that the “civil service model of moving staff every few years is not best suited to building deep sector-specific skills such as in trade years is not best suited to building deep sector-specific skills such as in trade and negotiations skills”; and negotiations skills”; that in January performance indicators for current EU exit workstreams were in development; and that DIT needs to work closely with other government departments and to develop its own internal organisation. • that in January performance indicators for current EU exit workstreams were LegislationDIT also acknowledges that it is crucial that it maintains a constructive relationship with the devolved administrations. in development; and DIT’s legislative programme includes trade issues covered in the European Union and UK Export Finance Department for International Trade | (Withdrawal) Act, the Sanctions and anti-Money Laundering Act, the Trade Bill, the • that DIT needs to work closely with other government Taxation (Cross Border Trade) Act. departments and to develop its own internal organisation.

DIT also acknowledges that it is crucial that it maintains a constructive relationship with the devolved administrations. Departmental overview 2018

10 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Supporting inward investment and exporting companies 9/10

Supporting inward investment and exporting companies DIT is responsible for driving growth in the value of UK exports and promoting inward investment to Trade in goods exports, imports and balances, Trade in services exports, imports and balances, the UK. Specific investment and export teams have been created within the department to undertake, DIT is responsibleimplement and monitor work for in thisdriving area. growth in the value of 2007–2017 2007–2017 UK exportsTwo charts. and promoting inward investment to The first one shows trade in goods, imports, exports and balances, 2007-2017. the UK.The Specificsecond one shows investmenttrade in services, , imports, and exports andexport balances, teams2007-2017. have £ billion £ billion Investment into the UK from abroad tripled from 2016, from 7.9% of nominal GDP in 2016 to 23.5% 600 300 been createdin 2017. within the department to undertake, implementIn August and 2018, monitorDIT published workits Export in Strategy. this DITarea. has set a target to increase the share of UK GDP devoted to exports from 30% to 35%. DIT says this is a long-term ambition and has not given a date for its realisation. 500 250

Promoting the UK and its 400 businesses overseas 200 DIT works to Developing and maintaining 300 promote the UK as relationships with investors a place for inward investment by: 200 150 Providing support and guidance to inward investors 100 100

Raising awareness of how 0 exporting can help firms and the support available to them 50 as part of the ‘Exporting is GREAT’ campaign -100

Workshops and masterclasses -200 0 (for example, the E-Exporting programme provides UK 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 DIT supports UK companies with e-commerce 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 companies who related support) Goods exports wish to export Goods imports Goods balance Services imports Services exports Services balance overseas through: A network of overseas partners Source: Office for National Statistics, UK Balance of Payments: The Pink book 2018 which give UK exporters Department for International Trade and UK Export Finance Department for International Trade

practical and cultural advice | on developing exports

Investment into the UK from abroad tripled from In August 2018, DIT published its Export International Trade Advisors who work with Small and Medium- 2016, from 7.9% of nominal GDP in 2016 to Strategy. DIT has set a target to increase the sized Enterprises to help them 23.5% in 2017. share of UK GDP devoted to exports from 30% develop an export plan and build to 35%. DIT says this is a long-term ambition their capability and knowledge to

and has not given a date for its realisation. Departmental overview 2018 undertake international business

11 PART ONE – THE DEPARTMENT FOR INTERNATIONAL TRADE CONTENTS Accountability to Parliament 10/10

A diagram showing Accountability to Parliament DIT is accountable to Parliament in three separate ways

Financial Trade Accountability accountability agreements for policy

DIT is accountable to Parliament for DIT has proposed accountability The International Trade Committee holds its spending. The Committee of Public arrangements for trade deals. It DIT to account for its administration Accounts holds DIT to account for the identified two main areas: and policy. efficiency, effectiveness and economy Agreements rolled over from The Trade Remedies Authority is a with which it spends money. • previous EU agreements. The non‑departmental public body and DIT has to spend money in accordance process for these agreements is set as such is held to account by Parliament with the authority granted through out in the Trade Bill. The bill received through DIT. the estimates process and its second reading in the House of legal authorities. Lords in September. In March 2018, the Secretary of State • New trade agreements: issued a Ministerial Direction to the The Secretary of State promised Department to enable spending of up to • in July 2018 that DIT would £8.9 million on the new Trade Remedies consult widely on new trade Authority. The Direction enabled DIT to agreements before beginning begin spending money on establishing

negotiations. and UK Export Finance Department for International Trade the Authority in advance of the Trade Bill | completing its stages in Parliament. • New trade agreements would count as treaties under the Constitutional Reform and Governance Act 2010. The government would have to bring forward primary legislation to implement them. Departmental overview 2018

12 PART TWO – UK EXPORT FINANCE CONTENTS About UK Export Finance 1/4

UK Export Finance (UKEF), the trading name for the Export Credits Guarantee Department, is the UK’s export UKEF WORKS WITH OTHER DEPARTMENTS TO SUPPORT ITS MISSION credit agency. UKEF works with private sector lenders and credit insurers to ensure that UK companies can access export finance. About UK Export Finance UK Export Finance (UKEF), the trading name for the Export Credits Guarantee Depart- ment, is the UK’s export credit agency. UKEF works with private sector lenders and credit Commercial finance insurersUKEF to ensure alsothat UK companiesoperates can access under export finance. international agreements partners (45 lenders) UKEF also(principally operates under internationalthe Organisation agreements (principally for the Economic Organisation for EcoCo-operation- nomic Co-operation and Development (OECD)) that seek to create a ‘level playing field’ by settingand terms Development under which export credit (OECD)) agencies can thatsupport seekexports. However,to create not a ‘level all exportplaying credit agencies field’ are party by to thesesetting international terms agreements under and competitionwhich export credit for UK exporters is increasingly from non-OECD countries whose export credit agencies are notagencies bound by these agreements. can support exports. However, not all export Industry bodies Duringcredit 2017-18, UKEFagencies “significantly are increased” party its capacity to these for more internationalthan 100 markets agreements Commercial and implemented an increase in its risk appetite (allowed by HM Treasury in the Autumn such as trade associations Statementand 2016). competition for UK exporters is increasingly from and chambers of insurance specialists commerce (48 specialist brokers) non-OECD countries whose export credit agencies are not bound by these agreements.

During 2017-18, UKEF “significantly increased” its capacity for more than 100 markets and implemented an increase in its risk appetite (allowed by HM Treasury in the Autumn UK Export Finance Statement 2016).

Foreign export credit agencies Other government through reinsurance departments or cooperation (HMT, FCO, DIT, arrangements BEIS and DfID) Department for International Trade and UK Export Finance Department for International Trade

Intermediaries | such as accountants Note and lawyers 1 HMT – HM Treasury; FCO – Foreign & Commonwealth Office; DIT – Department for International Trade; BEIS – Department for Business, Energy & Industrial Strategy; Department for International Development

(DFID); UKEF – UK Export Finance. Departmental overview 2018

A diagram showing U.K.E.E works with other departments to support its mission 13 PART TWO – UK EXPORT FINANCE CONTENTS Role in support to exporting companies 2/4

In 2017-18: UKEF is responsible for ensuring that no viable UK export fails due to a lack of finance or insurance,while operating at no cost to UKEF directly supported UKEF’s shorter-term trade the taxpayer. 77% finance products supported of these companies UKEF’s activities within the UK aim to increase awareness and uptake of short-term 191 were SMEs trade finance products, particularly by small- and medium-sized enterprises (SMEs). companies £466m By providing insurance, guarantees, finance and access to private sector support, of new export contracts Role in support to exporting companies and the maximum liability UKEF helps UK companies to: UKEF is responsible for ensuring that no viable UK export fails due to a lack on all new business was of finance or insurance, while operating at no cost to the taxpayer. UKEF’s activities within the UK aim to increase awareness and uptake of £2.5 billion short-term trade finance products, particularly by • win export contracts by providing attractive financing small-terms and medium-sized to their enterprisesbuyers; (SMEs). By providing insur- ance, guaran- tees, finance and access to private sector support, UKEF helps UK companies to: • fulfil contracts by supporting working capital loans andwin exportcontract contracts bybonds; providing attractiveand financing terms to their buyers; fulfil contracts by supporting working capital loans and contract bonds; and get paid by providing insurance against buyer default. • get paid by providing insurance against buyer default.How UKEF delivers its support In their 2017–2020 business plan, UKEF set out the suite of prod- ucts that they offer. These include: Short-term credit insurance, Bond support schemes, Working capital facili- ties, Export credit schemes, Fixed-rate financing, Direct lending, Over- seas invest- ment insurance, Unfair calling insurance, Letter of credit guarantee, UKEF supplies financ- ing for these products but it also works closely with other departments including DIT and FCO to identify opportunities for UK exports. UKEF continually reviews its product range annually, consulting with stakeholders to ensure it looks with fresh eyes at the needs of exporters. How UKEF delivers its support In 2017-18: UKEF directly supported 191 companies. In January 2018, the UK construction company Carillion went into In their 2017–2020 business plan, UKEF set out the suite of products77% of these thatcompanies they were offer.SMEs. These include: UKEF’s shorter-term trade finance products supported. liquidation. UKEF supported a number of projects in which Carillion £466m of new export contracts and the maximum liability on all new business was £2.5 billion. was the UK contractor. In these cases, the financial support was • Short-term credit insurance • Direct lending provided to Carillon’s overseas buyers and so UKEF’s exposure is not to Carillion itself. • Bond support schemes • Overseas investment insurance Construction has completed in the majority of Carillon projects supported by UKEF; Working capital facilities Unfair calling insurance • • in these cases the overseas buyer is repaying the finance, as agreed. Carillion’s UK • Export credit schemes • Letter of credit guarantee joint venture partners have taken on the contracts in all four of the uncompleted projects, and UKEF continues to support these projects. • Fixed-rate financing

UKEF supplies financing for these products but it also works closely with other departments including DIT and FCO to identify opportunities for UK exports. UKEF continually reviews its and UK Export Finance Department for International Trade | product range annually, consulting with stakeholders to ensure it looks with fresh eyes at the needs of exporters.

Source: UK Export Finance, Business Plan 2017–2020, UKEF Annual Report and Accounts 2017-18 Departmental overview 2018

14 PART TWO – UK EXPORT FINANCE CONTENTS Financial controls 3/4

UK Export Finance funds its administrative costs and the cost of the risk that it takes on through income generated from its customers. Parliament has put in place a number of financial limitations UKEF Ministerial Direction on UKEF’s investment activity to ensure there are controls over the risks that UKEF takes on. On 5 July 2018 the Secretary These controls and performance against them are set out in the table below. They apply to all of State for International Trade of the Department’s business conducted since 1991. issued a Ministerial Direction to the Department to provide around £5 billion of financing and UKEF performance against its investment activity controls insurance to support the export of Financial controls Typhoon aircraft and associated UKEF UKIndicator Export Finance funds its administrative costs and the cost of the risk that it takes onPerformance through in 2017-18 equipment services to Qatar. This income generated from its customers. Parliament has put in place a number of financial limitations Direction was issued in response on UKEF’s investment activity to ensure there are controls over the risks that UKEF takes on. to the Accounting Officer advising A limit on the total amount of taxpayers’ money that UKEF committed £23.5 billion of taxpayers’ money These controls and performance against them are set out in the table below. They apply to all the Secretary of State that, due may be put at risk against a limit of £61.6 billion of the Department’s business conducted since 1991. to the quantum, the time horizon and political nature of the risks, the A limit ona diagram UKEF’s showing riskUKEF performanceappetite against – there its investment should activity be controls UKEF’s forecast losses do not exceed £1.4 billion UKEF Ministerial Direction transaction would not fit within the less thanOn 5 aJuly 1% 2018 chance the Secretary of of Statelosses for International over 10 Trade years issued a Ministerial Directionover to the next 10 years on a less than 1% exceedingthe Department £5 billion to provide around £5 billion of financing and insurance to support the chance basisexport Department’s normal underwriting of Typhoon aircraft and associated equipment services to Qatar. This Direction was issued in response to the Accounting Officer advising the Secretary of State that, due to the quantum, the criteria. In particular, although the time horizon and political nature of the risks, the transaction would not fit within the Department’s Department considers the overall UKEF hasnormal accumulated underwriting criteria. In sufficient particular, although revenue the Department to considerscover the overallUKEF’s risk of reserve index did not fall below 4.28 against a possiblethe transactionlosses to be low and while the Department believes it will receive adequate premiumtarget to minimum of 1 risk of the transaction to be low compensate for the estimated risk, the level of financial exposure is in excess of the Department’s financial limits for Qatar, as set by HM Treasury. and while the Department believes UKEF must earn sufficient premium income to UKEF has earned, or expects to earn, premium it will receive adequate premium cover all its risks and operating costs over rolling income which exceeds risks and costs against to compensate for the estimated three-year periods each of the rolling three-year periods reported in risk, the level of financial exposure the 2017-18 accounts (all results were in the range is in excess of the Department’s 1.47–1.51 against a target of 1.00) financial limits for Qatar, as set by HM Treasury. Each year UKEF must charge enough premium UKEF charged enough premium to cover the cost to cover the cost of its risks and most of its of its risks in 2017-18 (ratio achieved of 2.33 against

administration costs a target of 1.35) and UK Export Finance Department for International Trade |

Source: UK Export Finance, Annual Report and Accounts 2017-18 Departmental overview 2018

15 PART TWO – UK EXPORT FINANCE CONTENTS Where UKEF support goes 4/4

UKEF support by region and sector Type of support Most UKEF support goes to companies in the South of England UKEF’s financial exposure is mostly in its buyer credit and direct loan businesses. Its most frequently used facilities (51%), followed by the Midlands (18%), the North of England (13%) are its Bond or Export Working Capital and Insurance products. and Northern Ireland, Scotland and Wales (18%).

69% Buyer credit guarantee 6% North Ireland, Scotland and Wales 26% Direct loan to buyer 1% 18% Product use Product use by maximum by number liability 3% Bond or Export Working 56% of facilities Capital support Midlands 18% South of 2% Insurance 37% England 51% North of England 13% UKEF’s portfolio by international region UKEF supported several different sectors across the UK economy UKEF’s accounts show that the regional breakdown of its whole portfolio of assets at risk is focused on Africa in 2017-18. Most of its support went to manufacturing industries. and the Middle East.

Administrative and Information and UKEF assets at risk support service activities communication 5% 5%

Professional, scientific and technical activities 9% Sector supported by UKEF Manufacturing Construction 48% 10% and UK Export Finance Department for International Trade Middle East and Africa Europe Asia and Pacific Americas | 45% 20% 21% 14%

Wholesale and Other including retail trade education and water 11% 12% Departmental overview 2018

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