The Government has recognised the importance of trade credit insurance in the 2009 budget and pledged to cover a shortfall in provision with a top-up scheme.
It has been extended to all industries and all stages of the supply chain with the full scheme capped at £5 billion.
14,000 companies of all sizes currently buy trade credit insurance against supplies to over 250,000 UK businesses as a guarantee that their bills will be paid.
Suppliers who experience reductions in credit limits may choose to stop future deliveries or refuse to extend credit, adding to pressures on firms potentially already facing difficulties and tending to reduce the level of trade.
In response, the Government will allow, from May 2009 until end December 2009, suppliers to purchase six-months’ ‘top-up’ insurance from the Government if credit limits on their UK customers are reduced, backdated to 1 April 2009.
The Government has worked collaboratively with the private sector insurers, who will provide this product on the Government’s behalf, to design a scheme that is well targeted and protects taxpayers’ interests.
The amount available to each supplier if a company’s credit limit is reduced will be that which either restores cover to the original amount, doubles the amount the company is able to obtain from the private sector, or £1 million, whichever is the lower.
The aggregate level of insurance provided under the scheme will be capped at £5 billion, and companies from all sectors of industry and from all stages of the UK supply chain will benefit from the increased certainty that this scheme provides.
The Working Capital Scheme (WCS) will also be used to help introduce the Trade Credit Insurance Scheme.