Why Rare Earth Minerals are Key to the UK's Sustainability

The UK government has unveiled a new financing guarantee intended to reinforce the nation’s critical mineral resources and enhance the resilience of its mining supply chains.

Through its Critical Goods Export Development Guarantee, UK Export Finance (UKEF) aims to make it easier for businesses producing or processing critical minerals to secure finance for long-term contracts and domestic projects.

The measure targets UK suppliers contributing to export routes, helping to reduce reliance on geopolitically sensitive markets and heavily concentrated supply networks.

Rare earth minerals (REMs) are fundamental to how the UK will decarbonise its economy simply because they sit at the heart of most modern low-carbon technologies.

This includes everything from EVs, to wind turbines and grid-scale battery storage. Minerals like lithium or cobalt are indispensable when it comes to building more efficient, compact and powerful systems.

What's more, these resources are growing scarcer and scarcer every year, meaning that the UK will need to establish a secure supply line for REMs if it intends to fulfil its commitments to sustainability and net zero.

Establishing a strong supply chain for rare earth minerals

Under the initiative, UKEF can guarantee as much as 80% of lending from commercial banks to approved UK-based firms or projects.

Eligible companies must be active in producing or transforming critical minerals for UK exporters, with the purpose of encouraging more supply chain activity to take place domestically while unlocking access to significant financing opportunities.

The definition of critical minerals follows the UK Critical Minerals Intelligence Centre list, although UKEF retains discretion to include other materials on a case-by-case basis.

UK suppliers must run operations within the country and supply at least half of their critical mineral output to UK exporters. This proportion may drop to 20% if a minimum of 5% of the company’s annual turnover originates from international sales.

UK-based buyers of these materials must also export, generating a minimum of 20% of UK turnover from exports either in the previous financial year or averaged across the last three years, and must employ staff and operate premises in the country.

All projects require UKEF’s approval through anti-bribery, environmental and human rights due diligence checks.

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."

The UK's strategic aims and 2035 goals

Because the UK has legally binding climate targets and is rapidly expanding offshore wind and EV deployment, secure access to rare earths underpins both its decarbonisation pathway and industrial competitiveness.

Without reliable supply, projects risk higher costs, delays or a shift back to less efficient technologies that jeopardise emissions goals.

The new guarantee arrives alongside the government’s Vision 2035: Critical Minerals Strategy, a decade-long roadmap setting out how the UK will obtain the materials needed to drive growth, national security and the clean energy transition.

Recognising that domestic extraction alone cannot satisfy increasing demand for minerals such as lithium, copper and rare earth elements, the UK has committed to meeting at least 10% of total critical mineral demand via home production by 2035, with a further 20% met through recycling.

Targets include an annual output of 50,000 tonnes of lithium and a diversification rule capping dependence on any single country at 60% for each mineral.

Financial backing comes from tools such as the National Wealth Fund and up to US$66m of new funding for critical minerals initiatives and energy cost support.

The programme is set to support mining, refining and recycling projects in the UK, while aiming to cut energy costs, streamline planning processes and address workforce shortages across the value chain.

Practical examples and industry impact

For example, a UK manufacturer making alloy components containing critical minerals for the electric vehicle industry might seek funding to expand production. Even if the company itself does not export, UKEF support could apply if its customers export vehicles, with the 80% guarantee reducing lender risk and increasing the likelihood of investment being approved.

Kirsty Benham, CEO at 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 complements UKEF’s existing Critical Minerals Supply Finance scheme, which helps overseas partners that supply critical minerals to UK exporters.

Together, these financial tools represent a coordinated approach to developing domestic capabilities and strengthening international supply chains, forming part of the UK’s broader Industrial Strategy to reinforce sectors critical to both the economy and national security.