Just over three weeks ago the economic secretary to the Treasury, John Glen, announced that businesses which are struggling to pay trade credit insurance due to the coronavirus pandemic would receive support from the government. Today the Government has announced it will provide guarantees of up to £10 billion to trade credit insurance schemes for business-to-business transactions.
The Trade Credit Reinsurance scheme, which has been agreed on following extensive discussions within the insurance sector will see the vast majority of trade credit insurance maintained across the UK. These measures will support thousands of businesses – particularly in the non-service sectors – by protecting them against customer defaults or payment delays.
Discussing this announcement, Glen said: “Billions of pounds of business turnover is supported by trade credit insurance each year. This reinsurance scheme will see the government and insurers working closely together to ensure that the vast majority of this cover remains in place. This means that businesses and supply chains can continue to be protected at this pivotal time as we begin to kick start the economy.”
This scheme is available on a temporary basis for nine months, backdates to April 01, 2020, and will run until December 31, 2020, with an opportunity for extension to this end-date if required. It will be followed by a joint BEIS/HMT-led review of the trade credit insurance market to make sure it is fit for purpose in continuing to support businesses in the future.
Reacting to this announcement the CBI director of financial services, Flora Hamilton, welcomed the new government guarantee as a critical step, along with other government financial support in driving the recovery of the UK. The director general of the British Chambers of Commerce said this step was a demonstration by the government that it is listening to the concerns of its business communities.
The MD of trade credit at Gallagher, Tim Fisher, meanwhile said that the news will enable thousands of UK businesses to trade with confidence as the economy is reinvigorated, noting that, before this scheme was agreed, Gallagher had seen a significant decrease in risk appetite among insurers underwriting this line of business.
“Trade credit is essential for businesses to enable them to extend credit terms to their customers and is vital to managing risk in the supply chain,” Fisher said. “At times of high economic uncertainty it’s more important than ever for businesses to have confidence in their supply chain and their customers’ ability to pay for goods and services. Trade credit insurance provides this and this Government guarantee will reassure the insurers that operate in this market.”
