UK minister overrides UKEF risk warning to raise Ukraine cover to £6.5bn

Business Secretary Jonathan Reynolds has directed UK Export Finance (UKEF) to increase its Ukraine export-credit exposure limit by £3bn to £6.5bn, despite a warning from the agency’s accounting officer that the financial risks fall outside its normal underwriting criteria.

The decision, disclosed in correspondence published alongside the UK Budget on 28 October, raises UKEF’s country limit from £3.5bn and will allow it to consider further guarantees and financing for strategically important exports to Ukraine.

In a letter dated 23 October, UKEF chief executive and accounting officer Tim Reid said the probability of default and expected loss associated with the agency’s Ukraine exposure remained exceptionally high.

He concluded that extending support did not satisfy the regularity requirements of UKEF’s existing Treasury consent and that he could not establish whether the additional exposure represented value for money.

Reid also warned tExport Finance, Trade Finance, Riskhat future debt relief could lead to the restructuring of UKEF-backed obligations and losses to the Exchequer. He said Ukraine-related support was already expected to contribute to a substantial net operating deficit for UKEF in 2025–26.

Reynolds responded on 25 October with a formal ministerial direction, arguing that national security, foreign policy and economic considerations justified the additional risk. The decision reflects the government’s commitment to Ukraine’s defence and reconstruction, alongside opportunities for British exporters.

UKEF has previously supported transactions involving nuclear fuel, air-defence equipment and infrastructure reconstruction. The government said the higher limit would allow the agency to assess further projects, with military support among the priorities.

The distinction between the new ceiling and actual financing is important. The additional £3bn represents potential export-credit capacity, not a loan already advanced or a confirmed loss to taxpayers.

Reid’s letter also makes clear that HM Treasury consent is required before the ministerial direction can be implemented and additional support provided. The published correspondence does not establish that this approval has already been granted.

For export financiers, the decision illustrates how government-backed credit may be deployed for strategic purposes even where ordinary commercial underwriting standards would not support the exposure.

It also places the financial treatment of guarantees under scrutiny. Expected losses may have to be recognised when support is issued, well before any borrower actually defaults.