Trade Credit Insurance backed by £10bn Govt guarantee

Posted on 4 Jun 2020 by Jonny Williamson

Trade Credit Insurance, which protects hundreds of thousands of business-to-business transactions against customer defaults or payment delays, will receive up to £10bn of government guarantees, ministers have announced.

The Trade Credit Reinsurance scheme will see the vast majority of Trade Credit Insurance coverage maintained across the UK.

The guarantees will support supply chains and help businesses during the Coronavirus pandemic to trade with confidence, safe in the knowledge that they will be protected if a customer defaults or delays on payment.

Trade Credit Insurance is a necessity for many businesses – particularly those in non-service sectors such as manufacturing and construction.

The scheme, reportedly agreed following “extensive discussions with the insurance sector”, is available on a temporary basis for nine months, backdated to 1 April 2020, and running until 31 December 2020, with the potential for extension if required.

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.”  

Stephen Phipson, CEO of Make UK, noted that for most manufacturers, “credit insurance is essential – giving them certainty that they will be paid for the orders they deliver,” as such he described the scheme as a “welcome boost to our nation’s makers”.

 IoD head of Europe and Trade Policy, Allie Renison, went one step further, calling the measures “ a lifeline for many businesses with nowhere else to turn”.

CBI director of Financial Services, Flora Hamilton noted that the Trade Credit Insurance could enable many businesses “to prepare for restart in earnest and bring employees off the job retention scheme and back into work”.