The Economic Secretary to the Treasury, John Glen, has announced that businesses with supply chains relying on Trade Credit Insurance who are struggling to maintain cover due to the current pandemic will get support from the government.
Credit Insurance provides cover to hundreds of thousands of business to business transactions, insuring against buyer payment default and buyer insolvency, giving businesses confidence to trade knowing that they will get paid for the goods and services they are providing. As of April 2020 there was over £171 billion of insured business activity, covering transactions between around 13000 suppliers and 650,000 buyers. However, with businesses struggling to pay bills owing to the impacts of the Coronavirus pandemic, there is a risk that credit insurance cover could be withdrawn or premiums increase to unaffordable levels.
In order to allow credit insurance to continue to support businesses and supply chains, the UK government will temporarily guarantee business-to-business transactions that are currently supported by a credit insurance policy. This means that the majority of trade credit insurance coverage will be maintained across the market.
Commenting on this announcement, 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.”
And 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 who currently operate in the trade credit market. The government will work with insurers and businesses on the full details of the scheme. The government have so far stated that the guarantees will cover UK domestic and exporting firms, with agreements to be in place by the end of May. They have also stated that the guarantee is temporary, only targeting economic challenges that are a result of the CV-19 pandemic and will provisionally last until the end of the year. Further details are to be announced.