What is the UK Government's Critical Minerals Guarantee?

The UK Government has launched a new financing guarantee aimed at reinforcing the country's domestic capabilities in critical minerals and enhancing the resilience of its export supply chains.

UK Export Finance (UKEF) has introduced the Critical Goods Export Development Guarantee, which could help businesses that supply critical mineral products to secure financing for long-term contracts and domestic investment projects.

The programme is targeted at UK-based suppliers whose products are integral to export supply chains as a measure to reduce dependencies on concentrated global supply networks and geopolitical pressures.

The Export Development Guarantee framework

The Critical Goods Export Development Guarantee enables UKEF to provide a guarantee for up to 80% of the finance offered by commercial lenders to eligible UK companies or projects. This financial backing is available for businesses involved in the production or processing of critical minerals destined for UK exporters.

The initiative is intended to encourage the onshoring of important supply chain elements and improve access to high-value financing. The list of eligible minerals is defined by the UK's Critical Minerals Intelligence Centre, although UKEF has the discretion to support other minerals on a case-by-case basis.

To be eligible, UK suppliers must have both premises and employees in the UK. They are also required to supply at least 50% of their critical mineral products to UK exporters. This threshold is lowered to 20% for companies that generate at least 5% of their annual turnover from direct overseas sales.

The UK buyers of these products must be UK-based exporters generating a minimum of 20% of their UK turnover from exports in the last financial year or as an average over the past three years. They must also maintain the domestic premises and employees.

All transactions are subject to UKEF's due diligence processes covering anti-bribery, corruption and environmental, social and human rights standards.

Tim Reid, CEO of UK Export Finance, explains: "The Critical Goods EDG marks a step forward in UKEF's mission to support UK exporters and strengthen our economy. 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."

Aligning with the critical minerals strategy

This guarantee aligns with the government's published 'Vision 2035: Critical Minerals Strategy', a 10-year plan to secure the mineral resources necessary for economic growth, national security and the transition to clean energy.

The strategy acknowledges that domestic mining alone will not be sufficient to meet the increasing demand for materials like lithium, copper and rare earth elements. According to the strategy, the UK has a goal to source at least 10% of its aggregate critical mineral demand from domestic production by 2035, with 20% coming from recycling.

The government has also set targets to produce at least 50,000 tonnes of lithium annually and to ensure no more than 60% of any single mineral is sourced from one country.

Practical implementation and industry impact

A practical application of the guarantee could involve a UK-based manufacturer that supplies a metal alloy component containing critical minerals to the electric vehicle sector.

If this manufacturer sought a loan to construct a new large-scale production facility, UKEF could offer its support. Even if the manufacturer itself is not a direct exporter, the guarantee could be provided because its clients export a portion of their finished electric vehicles.

By guaranteeing 80% of the loan, UKEF reduces the lender's risk, potentially making the financing possible. The move has been recognised by industry bodies.

Kirsty Benham, CEO at the Critical Minerals Association (UK), says: "The Critical Goods EDG will be a key pillar for securing the UK's position in critical minerals supply chains.

"By supporting domestic capabilities alongside international partnerships, UKEF is helping to create a resilient infrastructure to compete effectively in global markets."

This new guarantee works in tandem with UKEF's existing Critical Minerals Supply Finance, which offers financing to overseas companies that have agreements to supply critical minerals to UK exporters. These two mechanisms form a comprehensive approach to bolstering both domestic production and international supply chains.