Trade Credit Insurance will now receive up to £10bn of government guarantees, ministers have announced today.
The Trade Credit Reinsurance scheme, which provides essential cover to thousands of business-to-business transactions, was recently agreed following “extensive” discussions with the insurance sector.
The scheme provides cover to business to business transactions, particularly in non-service sectors, such as manufacturing and construction.
It insures suppliers against companies defaulting on payment, but due to the pandemic, businesses are at risk of having their credit insurance withdrawn, or facing increased premiums.
The government-backed £10bn guarantee will now ensure that the “vast majority” of Trade Credit Insurance coverage is maintained across the UK.
The guarantees will support supply chains and businesses during the ongoing pandemic, helping them to “trade with confidence, safe in the knowledge that they will be protected if a customer defaults or delays on payment”.
The scheme is available on a temporary basis for nine months, backdated to 1 April 2020, and will run until 31 December 2020, with a potential for extension if required.
Business secretary of state, Alok Sharma, said: “Trade Credit Insurance is a daily necessity for hundreds of thousands of businesses across the UK – particularly those in non-service sectors such as the manufacturing and construction sectors.
“Our £10bn guarantee gives peace of mind to businesses, allowing them to continue to trade and maintaining liquidity in supply chains. This reinsurance scheme is an important step as we carefully set about firing up our economy as we emerge from the pandemic.”
The economic secretary to the treasury, John 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.”
BCC director general Adam Marshall said: “The government has demonstrated once again that it is listening to the concerns of our business communities.
“The launch of a government-backed guarantee to support the provision of trade credit insurance will help ensure that this vital lifeline remains available to businesses during and after this crisis, helping to maintain supply chains and trade.”