- UK Export Finance (UKEF) has introduced a Critical Goods Export Development Guarantee to support UK businesses supplying critical mineral products to UK exporters.
- The guarantee will enable businesses to access high-value finance.
- Demand for critical minerals, necessary for the energy transition, is projected to keep growing, but supply chains are already stretched thin.
UK Export Finance (UKEF), the UK’s government-backed export credit agency, announced yesterday it would offer a new guarantee to support UK businesses supplying critical mineral products. This is expected to secure UK supply chains of the materials, critical for the energy transition, in the next quarter-decade and beyond.
The newly-launched Critical Goods Export Development Guarantee will give UK-based businesses that supply critical mineral products – including both minerals themselves and goods such as rechargeable batteries, smartphones, and electrical wiring – to UK exporters access to high-value finance. This will make it less risky for lenders to give loans to UK minerals businesses, helping them secure long-term import contracts and increase investment. Businesses will be able to use the guarantee even if they themselves do not export outside the UK as long as some of the clients’ end products are exported.
This support builds on top of UKEF’s existing Critical Minerals Supply Chain Finance initiative, which provides financing for non-UK firms that supply critical minerals to UK exporters.
Critical minerals – sometimes also called rare earth minerals – are a group of about 30 minerals present in the Earth’s crust and used for a range of crucial technologies, from MRI machines and drone defence systems to electric cars and smartphones.
Critical minerals are necessary to produce many of the technologies used for the green transition, especially around clean energy. As the world moves towards net zero, demand for the already rare minerals will skyrocket: global demand for lithium, for example, is expected to increase more than tenfold by 2050 according to an International Energy Agency report.
Not many countries have reserves of critical minerals, and even fewer currently have the complex facilities needed to extract and refine them. China is by far the world’s leading producer and exporter. For example, it is responsible for 95% of global refined gallium and 93% of refined germanium, and is a major producer of many other critical metals it imports from countries without their own refining facilities.
Critical minerals became a major issue in the US-UK trade war, with China recently requiring export licenses for products containing even trace amounts of some elements and enacting export curbs for others. To ensure a stable domestic supply, on 22 November the UK government published its critical minerals strategy, outlining the ways in which the country will secure its supply chains and scale up domestic production.
“By backing UK-based companies who are vital to our export supply chains, we’re not just providing finance – we’re helping to build a more secure foundation for UK businesses to compete globally,” said Tim Reid, CEO of UKEF.
