UK backs £3bn export finance package to help Ukraine

Treasury Chancellor Nadhim Zahawi supported the provision of pre-export financing through the state agency UK Export Finance (UKEF).

Sky News reports.

He has written to cabinet colleagues to offer provisional backing for credit facilities enabling British exporters to help defend and rebuild Ukraine.

In a letter to the international trade secretary, Anne-Marie Trevelyan,  and copied to the UK's Ministry of Defense, Foreign Office, and PM's Office, Mr. Zahawi said he considered it "essential that we continue supporting the government of Ukraine in any way we can and demonstrating our faith in the future of Ukraine."

A Whitehall source said the chancellor had played an active role in progressing the deal since taking up his post a few weeks ago.

The UKEF credit facilities comprise up to £2.3bn for the financing of military contracts identified by the Ukrainian government, with the remaining £700m earmarked for reconstruction projects.

Companies such as BAE Systems and Babcock International are believed to be likely to be among those to sign individual contracts with UKEF.

According to Mr. Zahawi's letter, his backing for the deal is contingent upon the resolution of legal questions relating to "the compatibility of these facilities with our international subsidy control obligations."

"Clearly, Ukraine is a high-risk market in which to operate commercially, and we must acknowledge the risk of losses is significant," he wrote. "UKEF must also, therefore, continue to mitigate against Exchequer losses as far as is reasonably possible."

The chancellor added that all individual contracts would also require Treasury approval.

In March, Ms. Trevelyan wrote to Louis Taylor, UKEF chief executive, instructing the agency to maintain its £3.5bn "market limit" for the country.

Although the £3bn support is modest in the context of Ukraine's military and reconstruction needs, it underlines Britain's central role in providing international aid to the country.

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