I remind Members that in Committee they should not address the Chair as “Deputy Speaker”. Please use our names when addressing the Chair. “Madam Chair”, “Chair” and “Madam Chairman” are also acceptable.
Clause 1
Limit on selective financial assistance for industry
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Amendment 3, in clause 2, page 1, line 8, at end insert—
“(a) In subsection (1), at the beginning insert ‘Except in respect of exports to which subsections (4B) and (4C) apply,’”.
Amendment 1, page 1, line 8, at end insert—
“(ab) In subsection (1), at the end insert ‘except in respect of exports to which the condition in subsection (4B) is met, where the amount shall not exceed £0’”.
This amendment is linked to Amendment 2. Together they provide that where the Secretary of State had reason to believe that modern slavery or human trafficking were likely to be present in the supply chain of the business recipient of the goods exported from the United Kingdom, the limit of commitments which could be made under arrangements relating to exports and insurance could not exceed zero.
Amendment 2, page 1, line 14, at end insert—
“(ca) After subsection (4A) insert—
‘(4B) The condition in this subsection is that the Secretary of State has reason to believe that modern slavery or human trafficking are likely to be present in the supply chain of the business recipient of the goods exported from the United Kingdom.’”
See explanatory statement for Amendment 1.
Amendment 4, page 1, line 14, at end insert—
“(ca) After subsection (4A) insert—
‘(4B) This subsection applies to exports of goods in respect of which the Secretary of State has reason to believe that the goods exported from the United Kingdom are likely to be re-exported in a way that would, had the goods been exported directly from the United Kingdom, be contrary to any provision of the any Sanctions and Anti-Money Laundering Act 2018, or of any sanctions regulations made under that Act.
It is good to see you in the Chair, Mrs Cummins. I welcome all Members to this slightly unusual Committee. Normally, a Committee of the whole House is awfully contentious, with everybody shouting at one another, but it will not be so contentious this afternoon—certainly not as regards the main body of the Bill. I will introduce the Bill now, and at the end I will respond to the debate, and on the amendments that several hon. Members have tabled.
Clause 1(a) will increase from £12 billion to £20 billion the aggregate limit of financial assistance that can be provided under section 8(1) of the Industrial Development Act 1982; this is to reflect inflation adjustments since the limit was last raised in 2009. Clause 1(b) will raise from £1 billion to £1.5 billion the level of incremental increases that can be made in an order by the Secretary of State; again, this reflects inflation adjustments since the limit was last raised in 2009. The parliamentary scrutiny arrangements for these incremental increases will remain precisely as they were, namely that they will be subject to the affirmative legislative procedure.
Clause 2 will amend the financial assistance for exports and overseas investment under the Export and Investment Guarantees Act 1991. It will make four changes to the Act: it will raise the commitment limit from £84 billion to £160 billion; it will simplify the legislation by expressing the limit in sterling, rather than in special drawing rights; it makes provision for the limit to be increased by increments of up to £15 billion through secondary legislation, as the need arises; and it will remove the limit on the number of occasions on which the commitment limit can be raised.
Clause 3 outlines the territorial extent of the Bill. I can confirm that the Bill does not engage the legislative consent motion process. My Department had discussions, prior to the introduction of the Bill, with all the devolved Governments; they confirm that the legislative consent motion process is not engaged.
This is a short Bill, but it involves potentially raising and spending a huge amount of public money, so in the interests of thorough scrutiny, I will speak to Opposition amendments 3 and 4 to clause 2, concerning the use of public finance for exports that may ultimately be re-exported to sanctioned destinations. Our amendments would prevent the Government from providing export finance or insurance where there is reason to believe that goods may be re-exported to Russia, or to any other country subject to UK sanctions. In such cases, the Secretary of State’s financial commitments would be capped at zero.
These amendments are not abstract. They respond to a very real problem in our world today that has been highlighted by independent analysis. For example, Sky’s Ed Conway has done extensive reporting showing that although direct exports to Russia have collapsed since sanctions were imposed, goods of UK origin are still reaching Russia through third countries. Exports to states such as Kyrgyzstan, Armenia and Uzbekistan have surged by extraordinary amounts—sometimes more than 1,000%. Obviously, these are not normal market movements; they are clear indications of diversion routes being used to circumvent sanctions.
These are not just trade flows on a spreadsheet. Sky News has shown that components of UK origin have been found inside Russian military equipment used on the battlefield in Ukraine. Among the items that have been identified in Russian systems are British-made microchips found in Russian drones, UK-origin electronic components inside Russian missiles and dual-use technology that should never have been able to reach Russia under the sanctions regime. Those components were not exported directly from the UK to Russia; they were routed through intermediary countries, often the same countries to which UK exports have suddenly spiked. President Zelensky has publicly raised concerns that UK goods are still making their way into Russia, despite sanctions.
May I commend the shadow Minister for what she has said? The Minister referred to discussions with the regional Administrations. UK Export Finance’s industrial support has helped a number of companies in Northern Ireland, including Wrightbus, with guarantees for international sales, to the tune of hundreds of millions of pounds. We in Northern Ireland are of the opinion that we still adhere to EU rules. Does the shadow Minister agree that this needs to be clarified, and that we need the transparency to which she has referred, so that the EU cannot continue to dictate terms to this nation through the back door of Northern Ireland? Does she agree that that is very important, and that the Minister and Government must respond to that?
The hon. Member makes a very important point, and I know that the House will be eager to hear how enthusiastic the Minister is about all the amendments that have been tabled. I am sure we will shortly hear whether he supports them, or why he does not and why he will urge his colleagues to vote against them this evening.
It is always a pleasure to serve under your chairship, Madam Chair. I welcome the Bill and, more broadly, the Labour Government’s focus on our modern industrial strategy. In the Black Country, where manufacturing is our tradition, businesses are following this agenda very closely. I am pleased to see that the Bill will result in increased headroom for both industrial financial assistance and UK Export Finance.
However, I have three questions for the Minister on practical points on SMEs’ access to finance in this Bill. First, on access to trade finance for SMEs, I speak to firms in Halesowen and Cradley Heath that can win export work on quality and reputation, but that lose contracts because they cannot bridge the working capital gap between buying inputs and getting paid. A forge may secure a promising overseas order, only to be asked by its bank for levels of security that are simply unrealistic for a business of that size. By the time finance is arranged, the customer may have gone elsewhere. Although I welcome the increased capacity in clause 2, I would like a reassurance from the Minister that UK Export Finance will translate the headroom into products that genuinely work for SMEs in a way that is faster, simpler and more proportionate to their requirements.
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Secondly, I want to speak up for downstream steel SMEs. We have several steel processing firms in my constituency, including Davro Steel, which takes steel and adds value through processing and distribution, supplying manufacturers that depend on reliable specifications and timings and price stability. However, those businesses are anxious about the direction of travel on steel tariff safeguards and quotas, because measures that protect larger players in the sector can, if designed poorly, raise input costs or restrict supply for downstream SMEs. I hope the Minister can reassure the House that he will look at the whole value chain, not just the headline producers, when the Government deploy the increased assistance enabled by clause 1.
Thirdly, on the defence supply chain, the Black Country has deep links to defence manufacturing, and two issues may impact on the positive changes in the Bill. The first is export licensing timelines, because excessive delays can kill a contract, and the second is the growing concern about environmental, social and governance-related access to finance. These are practical problems when a legitimate UK defence supplier struggles to access competitively priced finance, because lenders’ policies treat defence as reputationally high risk. I ask the Government to ensure that our regulatory architecture does not accidentally penalise lawful, strategically important businesses and industries in the defence sector.
I support the Bill. I support the intent behind clauses 1 and 2 to create headroom so that the Government can act to support manufacturers and exporters, but I ask the Minister for reassurance on three points: that SMEs will be able to access trade finance in practice; that downstream steel processors and manufacturers will not be overlooked in favour of larger players; and that defence exporters will see improvements in licensing speed and fair access to finance.
The Liberal Democrats support this Bill, and we support the amendments that are before the Committee today. The Bill does something that is straightforward and necessary: it raises the Industrial Development Act cap from £12 billion to £20 billion, reflecting inflation since the alignment was last set in 2009, and it nearly doubles UK Export Finance’s commitment limit from £84 billion to around £160 billion. Both the industrial assistance and export finance frameworks would hit their ceilings if we did not make these changes, so it is really important to make them. We support the Bill because British businesses need the Government’s backing to compete globally, and these limits need to keep pace with our ambition.
The amendments before us would strengthen the Bill in a few distinct ways. Amendments 1 and 2 would ensure that Government-backed export finance cannot be used to support businesses whose supply chains involve modern slavery or human trafficking. That is a straightforward ethical line. British taxpayers should not be underwriting exploitation, and we Liberal Democrats are glad to support the amendments. I ask the Minister to confirm what existing safeguards are in place, and whether implementation guidance will be issued so that businesses know where they stand.
Amendments 3 and 4 would address the risk that UK Export Finance could facilitate sanctions evasion through re-exporting. As we raise the statutory limit to £160 billion, Parliament must be satisfied that none of this expanded headroom can be used in a way that undermines our sanctions regime, so we support the amendments.
New clause 1 would require annual reports on the impact of the limit changes on each of the four UK nations. Although export finance is a reserved matter, outcomes are not necessarily evenly distributed. A report would allow Parliament to scrutinise whether the expanded capacity is reaching every single part of the United Kingdom, so we support the new clause. New clause 2 would require annual reports on the steel industry. Steel is of profound strategic importance to the UK and deserves the dedicated parliamentary scrutiny that the new clause suggests, so we support it.
I rise to speak in support of amendment 1, which appears in the name of the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith). The Bill is narrow, but it gives us an opportunity to raise this matter.
Thanks to the work of this House, public bodies such as the Department of Health and Social Care are legally required to eradicate slavery in their supply chains under the Health and Care Act 2022 and the National Health Service (Procurement, Slavery and Human Trafficking) Regulations 2025. We also strengthened the safeguards to ensure that public money is free from forced labour in last year’s Great British Energy Act 2025. There was a little bit of fuss about that at the time, but no slavery or human trafficking is present in any part of Great British Energy’s supply chain.
UK Export Finance still lacks those protections, but amendment 1 would fix that inconsistency. If we are increasing the financial limits available to UK Export Finance, we should ensure that British support for business abroad is never tied to exploitation. It would make the protection much bigger by covering everything across Government. We tried something like that with the Great British Energy Bill, and I was told I was right that this would not have been covered, but the Bill then went to the Lords and came back pretty quick. I thank the right hon. Member for tabling his amendment.
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(4C) In respect of exports to which subsection (4B) applies, the aggregate amount of the Secretary of State’s commitments at any time under arrangements relating to exports and insurance shall not exceed £0.’”
Clauses 2 and 3 stand part.
New clause 1—Impact of financial assistance limits—
“Within one year beginning on the date on which this Act is passed, and once every year thereafter, the Secretary of State must publish and lay before Parliament a report assessing the impact of the limits set by this Act on—
(a) England,
(b) Northern Ireland,
(c) Scotland, and
(d) Wales.”
This new clause would require the Secretary of State to publish an annual report on the impact of the limits set by this Act on each of the UK's devolved nations.
New clause 2—Impact of financial assistance limits on the steel industry—
“(1) No later than one year after this Act is passed, and annually thereafter, the Secretary of State must publish and lay before Parliament a report assessing the impact on the UK steel industry of the increases in the limit on selective financial assistance for industry and the commitment limits on financial assistance for exports and overseas investment for which this Act provides.
(2) A report under this section must include a statement of—
(a) the level of financial assistance provided in each month to UK steel undertakings under section 8 of the Industrial Development Act 1982 (as amended by this Act); and
(b) the number of UK-based full time equivalent jobs in the steel industry which, in the opinion of the Secretary of State, would have been lost had it not been for the increases in the limit on selective financial assistance for industry and the commitment limits on financial assistance for exports and overseas investment for which this Act provides.”
New clause 3—Impact of financial assistance limits (No. 2)—
“Within one year beginning on the date on which this Act is passed, and once every year thereafter, the Secretary of State must publish and lay before Parliament a report assessing the impact of the limits set by this Act on—
(a) gross domestic product (GDP),
(b) export capacity of small and medium-sized enterprises (SMEs), and
(c) volume of trade between the United Kingdom and the European Union.”
This new clause would require the Secretary of State to publish an annual report on the impact of the limits set by this Act on GDP, SMEs, and trade between the United Kingdom and the European Union.
I hope all hon. Members will agree that all three clauses should stand part of the Bill. I look forward to hearing the debate on the amendments.
That is why we believe that amendments 3 and 4 are necessary. They represent a simple but important safeguard. The UK must ensure that its export finance system does not inadvertently support supply chains that undermine our sanctions regime. In the case of Russia, we must be absolutely certain that no UK-backed goods are being diverted in ways that could support its illegal war against Ukraine.
The Minister has spoken about the need to expand UK Export Finance’s capacity and to support small and medium-sized enterprises in particular. We agree that export finance has an important role to play, but it must be deployed responsibly. I am sure that the whole Committee agrees that public money should never be used in ways that conflict with our foreign policy or national security objectives. Our amendments would ensure that the Government exercise due diligence, and that UK Export Finance support is aligned with the UK’s sanctions framework. I am sure that the Minister will agree that that is a constructive and proportionate proposal, and will want to support it tonight.
New clause 2, in the name of His Majesty’s Opposition, is about the steel industry. We can all agree that steel made in the UK is a strategic foundation sector for the United Kingdom. It supports thousands of skilled jobs and underpins supply chains across manufacturing, construction and defence. We did not oppose the Government’s emergency legislation last April, although we warned that it was rushed, and that the Government did not have a proper plan. Nearly a year on from that emergency legislation, and nearly two years into this Government, we are still waiting for the long-promised steel strategy.
The Government have still not been able to agree a deal with the Chinese, despite the Prime Minister’s visit to China. There has been secret meeting after secret meeting between Ministers and Jingye—meetings on which the Government have refused to update Parliament. New clause 2 would simply require the Secretary of State to publish an annual report on the impact of the increased financial assistance limits on the UK steel industry. That report would set out, first, the amount of financial assistance provided each month to UK steel undertakings under section 8 of the Industrial Development Act 1982, and secondly, the number of full-time equivalent steel jobs that, in the Secretary of State’s view, would have been lost without the increased limit. It is a straightforward accountability measure. If public money is being used to support the steel sector, Parliament and the public deserve to know how much is being spent, why it is necessary and what outcomes it is delivering.
The Government have repeatedly spoken about the importance of steel, and we agree that steel is very important, but without a clear strategy or transparent reporting, it is impossible to judge whether interventions are effective, and whether they represent value for money. How do we know that we are not providing a limitless amount of funding that will crowd out support for other industries, and how can we assess whether it is good value for the taxpayer? New clause 2 would not constrain the Government’s ability to act; it would simply ensure that support is justified, targeted and effective. I hope that the Minister will recognise the value of this additional transparency and accept the new clause.
I turn to amendments 1 and 2, tabled by my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith). We believe that they are sensible and straightforward. If the Secretary of State has reason to believe that modern slavery or human trafficking is likely to be present in the supply chain of a business receiving export-supported goods, obviously the amount of public financial support should be zero. That is surely the only responsible position that this House can take. We are inherently supportive of the need for transparency in supply chains, and will support the amendments.
I turn to new clause 1, tabled by the hon. and learned Member for North Antrim (Jim Allister). Providing transparency on the amounts that are allocated across the whole United Kingdom would seem to be helpful assistance to this House.
New clause 3, which appears in my name, would require the Secretary of State to report on the annual impact of the Bill on GDP, on the export capacity of small and medium-sized enterprises, and on the volume of trade between the United Kingdom and the European Union. UKEF’s 2024 to 2025 activity contributed £5.4 billion to the UK economy, and Parliament should be able to verify such a claim on an annual basis. According to the Office for National Statistics, there are 5.7 million SMEs in the UK, yet UKEF’s annual report shows that it supported just 667 businesses. Annual reporting would hold the Government to their own target of supporting an additional 1,000 SMEs to export. It would make visible whether the current eligibility criteria, which require at least 20% of a business’s annual turnover to be from exports in any one of the previous three years, continue to lock out businesses trying to break into export markets for the first time.
On the UK-EU trade part of new clause 3, the Chartered Institute of Export & International Trade has documented a 30% fall in EU export value among the smallest firms since the trade and co-operation agreement came into force. A recent Institute of Directors policy voice survey found that 54% of businesses that stopped exporting to the EU cited the trading relationship with the EU as one of the reasons why. These are not businesses that failed to break into new markets, but established exporters that have walked away from our largest and nearest trading partner because the barriers in their way are too great to bear. Every customs declaration and every check that did not exist before 2021 is another reason why businesses are not exporting to the EU, because it simply is not worth it for them. Those are the realities behind the statistics that simply increasing UKEF capacity alone cannot fix. Parliament should be able to see whether expanded UKEF capacity is making a measurable difference to those figures, so we hope the Minister will support new clause 3.
The most effective long-term support for British exporters would be a new bespoke UK-EU customs union. Analysis by Frontier Economics, commissioned by Best for Britain, in February 2025 suggested that a customs union could boost British GDP by 2.2%. The House of Commons Library estimates that this could generate £25 billion in additional annual tax revenue for His Majesty’s Revenue and Customs, which I know the Chancellor would be grateful for. New clause 3 is the link or accountability mechanism that would allow Parliament to see whether what has been proposed is working.
We will support the Bill and the amendments to it, because capacity without accessibility is meaningless, and capacity without accountability is unacceptable. The Government need to accept the new clauses that match the expanded headroom with the practical reforms to ensure that they reach the 5.7 million SMEs, which are the backbone of British business, currently not being supported by UK Export Finance.