Businesses with supply chains which rely on Trade Credit Insurance and who are experiencing difficulties maintaining cover due to Coronavirus will get support from the Government, the Economic Secretary to the Treasury, John Glen has announced.
Trade Credit Insurance provides cover to hundreds of thousands of business to business transactions, particularly in non-service sectors, such as manufacturing and construction. It insures suppliers selling goods against the company they are selling to defaulting on payment, giving businesses the confidence to trade with one another. But due to Coronavirus and businesses struggling to pay bills, they risk having credit insurance withdrawn, or premiums increasing to unaffordable levels.
To prevent this from happening, the government will temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market. This will support supply chains and help businesses to trade with confidence as they can trust that they will be protected if a customer defaults on payment.
The Economic Secretary to the Treasury, John Glen said:
“This country’s businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time. By guaranteeing business-to-business transactions currently supported by Trade Credit Insurance, we will help to maintain a vital cog in our economy.
This is on top of an unprecedented package of support we have put in place to help protect individuals, businesses and the economy.”
Business Minister, Paul Scully, said:
“Giving businesses the confidence to continue trading is vital to seeing us through this crisis. This guarantee will be essential as we seek to reopen new sectors of the economy and get the UK back to work in a way that is safe for everyone.”
The guarantee will be delivered through a temporary reinsurance agreement with insurers currently operating in the market.
The government will work with businesses and the industry on the full details of the scheme to ensure firms are supported and risk is appropriately shared between the government and insurers.
The guarantees will cover trading by domestic firms and exporting firms and the intent is for agreements to be in place with insurers by end of this month.
The guarantee will be temporary and targeted to cover CV-19 economic challenges, and will provisionally last until the end of the year. It will be followed by a review of the TCI market to ensure it can continue to support businesses in future. Further details will be announced in due course.
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.”
CBI Chief Economist Rain Newton-Smith, said:
“The Government’s decision to backstop trade credit insurance will protect thousands of jobs and allow many businesses across the UK to restart operations.
This intervention will keep cash flowing within critical supply chains and more importantly, it will help lower risk for our exporters and ensure that UK firms can continue to trade with other countries.
Getting this scheme up and running is crucial as the UK economy gradually restarts, while keeping public health as the first priority.”
FSB National Chairman Mike Cherry, said:
“As the pandemic continues to bite, small firms need all the help they can get to continue to trade domestically and internationally. This temporary reinsurance scheme should mean that small businesses don’t have their trade credit insurance withdrawn and should be able to continue to access affordable insurance to support trading with other businesses.
The intervention provides much needed confidence for small businesses to get back on their feet and start trading again as we enter recovery. This protection will be particularly helpful for small businesses operating in the supply chains of sectors like construction and manufacturing. We look forward to working with the government and insurance industry to get this scheme live as quickly as possible and to ensure that it helps small businesses to trade with confidence.”