How the UK is Bolstering Critical Mineral Supply Chains

The UK Government has launched the Critical Goods Export Development Guarantee in a bid  to strengthen domestic supply chains for critical minerals.

Introduced by UK Export Finance (UKEF), the initiative helps businesses that supply crucial mineral products to UK exporters secure financing for long-term contracts and domestic investment.

The scheme aims to reduce the vulnerability of these chains to geopolitical shocks. Under the programme, UKEF can guarantee up to 80% of the finance provided by commercial lenders to eligible UK companies.

This support encourages the onshoring of key supply chain elements and improves access to high-value financing for these suppliers.

Qualifying for the guarantee

The definition of critical minerals is guided by the list from the UK's Critical Minerals Intelligence Centre. However, UKEF has the flexibility to support other minerals on a case-by-case basis, giving procurement managers a degree of adaptability when sourcing.

To be eligible, UK suppliers must have premises and employees in the UK and supply a minimum of 50% of their critical mineral products to UK exporters. This threshold is lowered to 20% if the supplier generates at least 5% of its annual turnover from overseas sales.

UK buyers receiving these goods must be UK-based exporters that generate at least 20% of their UK turnover from exports. All transactions are subject to UKEF's due diligence processes, covering anti-bribery, corruption and environmental, social and human rights standards.

Tim Reid, CEO at 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."

Strategic supply chain goals

This guarantee aligns with the government's "Vision 2035: Critical Minerals Strategy," a 10-year plan to secure minerals essential for economic growth, national security and the clean energy transition. The strategy acknowledges that domestic mining alone cannot satisfy the escalating demand for materials; like lithium and rare earth elements.

By 2035, the UK aims to source at least 10% of its critical mineral demand from domestic production with 20% coming from recycling.

The government has also established a goal to produce at least 50,000 tonnes of lithium each year and to ensure that no more than 60% of any single mineral is sourced from one country. This diversification target is an important factor for supply chain risk management.

Wider government support includes a new £50, National Wealth Fund for critical minerals and schemes to help industries with energy costs planning processes and skills shortages.

Practical implications for procurement

In a practical scenario, a UK manufacturer supplying a metal alloy component with critical minerals to the electric-vehicle industry could secure a loan to develop a new production facility.

Though, not a direct exporter, UKEF could offer support because its clients the electric vehicle makers are exporters.

The 80% guarantee lowers the risk for the lender making the loan more likely. This in turn makes the domestic supplier a more stable and attractive partner for procurement teams.

Kirsty Benham, CEO of 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."

The Critical Goods Export Development Guarantee works alongside UKEF’s existing Critical Minerals Supply Finance, which offers financing to overseas companies that supply critical minerals to UK exporters.

These two initiatives represent a comprehensive approach to bolstering both domestic capabilities and international supply lines, forming a part of the government's Industrial Strategy.