Government to provide £10bn trade credit insurance guarantee

The Government has announced that it will provide guarantees of up to £10 billion to trade credit Insurance schemes for business-to-business transactions.

The Trade Credit Reinsurance scheme, which has been agreed following extensive discussions with the insurance sector, 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 underwrites an estimated £350 billion of economic activity of more than 630,000 businesses in the UK each year. It insures suppliers selling goods against the company they are selling to defaulting on payment, giving businesses the confidence to trade with one another

The scheme is available on a temporary basis for nine months, backdated to 1st April 2020, and running until 31st December 2020, with the 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 £10 billion 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.”

Stephen Phipson, CEO of Make UK, said “For most manufacturers, credit insurance is essential – giving them certainty that they will be paid for the orders they deliver. We’re pleased that the government has taken action to jump-start the credit insurance market – which will provide a welcome boost to our nation’s makers as they recover from the COVID crisis.”

IoD Head of Europe and Trade Policy Allie Renison said “These measures are a lifeline for many businesses with nowhere else to turn. To help the economy get up and running again, maintaining confidence in supply chains is crucial, and we are encouraged to see this come as the product of collaboration between government and industry.”

CBI Director of Financial Services, Flora Hamilton said “The new government guarantee to backstop trade credit insurance will be welcome by businesses across the UK. The TCI scheme will support supply chains, enable many to prepare for restart in earnest and bring employees off the job retention scheme and back into work.”

“This is a very critical step, along with other government financial support, in driving the recovery of the UK.”

Alun Sweeney, Regional Director UK & Ireland at Atradius said “We have recognised from the very beginning of this Covid-19 crisis that the consequences for trade would be significant and we very much welcome this positive and supportive response from the Government.”

“As an industry, we remain aligned in regard to the need for this kind of action and together with our colleagues at the Association of British Insurers we have been committed to make it a reality. The Scheme is an essential measure to help boost our economic recovery, help protect the supply chain, safeguard jobs, and increase business confidence and will make a real difference to the thousands of businesses who rely on the security that trade credit insurance cover provides.”

Milo Bogaerts, Chief Executive of Euler Hermes UK and Ireland, said “Through this landmark agreement the public and private sectors are joining forces to support ‘UK plc’ by maintaining liquidity and confidence in the intercompany trade credit market. This will help our customers through this difficult period, help them to remain competitive, and allow them to take every opportunity to restart trading with confidence as the UK economy emerges from lockdown.”

Todd Davison, MD of Purbeck Insurance Services, said “Trade Credit Insurance is one of the tools many businesses rely on to sustain cash flow. Like Personal Guarantee Insurance it provides huge peace of mind to the owners and directors and small businesses responsible for keeping their businesses afloat and their people employed.”

“The Trade Credit Insurance guarantee should mean many small businesses, particularly those in the construction and manufacturing sectors can continue to access affordable insurance to support trading with other businesses and provide confidence within the supply chain. It will be critical for policymakers to work closely with insurers, funders and businesses for the scheme to work effectively and to promote liquidity within these markets.”

“It remains crucial however that to help mitigate the risks of non-payment, small businesses keep talking to suppliers and customers who are likely to be in the same position. Constructive, transparent dialogue within the supply chain can help manage expectations and identify a collective way forward.”