Businesses were keenly waiting today to find out how the Government planned to tackle the crisis in trade credit insurance.
Contractors and manufacturers have been hit hard by steep rises in insurance premiums and excess payment levels with some in the construction sector seeing insurance facilities completely withdrawn.
HVCA president Gareth Vaughan described credit insurance as “almost extinct at the moment” and urged the Government to ensure any measures flowed down the entire supply chain.
Speculation has been mounting that chancellor Alistair Darling will announce a supply chain insurance plan in his budget today (April 22).
This follows a report in the Financial Times linked to a ‘government insider’ which suggested Mr Darling was finalising the details of a scheme which would offer guarantees for companies which have seen cover reduced, but not withdrawn.
Mr Vaughan said: “We really have seen credit insurance dry up and our members are reporting that it is creating difficulties.
“If the Government can put in place a scheme which can ease premiums and let insurance start flowing again that would be welcome, but we need to see the details and costs and we need to see it go down the whole supply chain to ensure it helps our members.”
Mr Vaughan said companies were losing business if they were unable to secure adequate insurance and companies are also facing cash flow problems as manufacturers increasingly demand cash on delivery.
Rudi Klein, chief executive of the Specialist Engineering Contractors group, said: “This sounds very encouraging considering credit insurance has virtually dried up in the industry for Small and Medium Enterprises and if you are able to get insurance, companies are asking for ridiculous amounts of excess payments.
“We don’t know the full details of these proposals, but in principle it would be welcome. But, it needs to be applied right across the industry – particularly as construction is suffering far higher levels of insolvency than any other sector.”
Mr Klein added that moves to improve credit insurance should not distract attention away from the continuing need to sort out payment security.
He said: “The priority has got to be that payment security is improved. The Government has said that people should be paid within 10 days on public sector contracts and that has to happen all the way down the supply chain. Credit insurance is only a fall back position - we should be reducing the problems of non-payment.”
The Confederation of British Industry has been pushing the Government to recognise the problem. CBI Director of Company Affairs Matthew Fell said: “The reduced availability of trade credit insurance is continuing to cause major headaches for those sectors which depend on it the most. With damage already being done to supply chains, the clock is ticking for the government to step in with a “top up” scheme.”
Mr Vaughan added that he hoped the budget would also provide a clear indication that promised public investment will finally be coming through and turn into real work prospects.
He said: “The Government has got a golden opportunity to say we will invest in our infrastructure and really follow through on that. We have heard lots on lots about spending on schools and other things, but everything appears to be on hold. It will be interesting to see if the budget is used as a platform to present new money and say to construction ‘This is the way to getting out of recession’.”