British industry has broadly welcomed the Government's decision to extend its £5bn trade credit insurance top-up scheme after limited take-up.
The Government said that eligibility for the scheme will be backdated to include suppliers whose credit insurance cover has been reduced since 1 October, instead of being limited to between 1 April and 31 December 2009.
Credit insurers insure suppliers against non-payment by businesses, but the withdrawal of their suppliers' cover can but put a major strain on a company's cash flow.
The restricted eligibility from 1 April was a reason for the very low take-up rates of the initial scheme, as many suppliers first started suffering reductions last spring. The UK's biggest credit insurer, Euler Hermes, said that about only 20 companies had signed up to the scheme, and the take-up rate is understood to have been lower at Atradius and Coface, although both declined to provide figures.
Shaun Purrington, regional commercial director of Atradius UK, said: "We have had a lot of interest, but a very small numbers of takers." He added: "We welcome it because it will bring more companies into the programme."
However, the British Retail Consortium said it should have been moved back to 1 April 2008, when insurers began removing cover. In this April's Budget, the Chancellor, Alistair Darling, unveiled the scheme and pledged up to £5bn to match the cover offered to suppliers by leading credit insurers for six months from 1 May. The initial scheme was also criticised because the top-up is only available for six months, and does not apply to suppliers whose cover had been completely withdrawn.
Richard Lambert, director-general of the CBI, said: "This change, which the CBI called for, gives more help to those businesses left vulnerable without sufficient trade credit insurance cover since the autumn."
Credit insurers are thought to be in talks with the Government about extending the scheme to exporters whose cover has been scaled back. The withdrawal of credit insurance was a factor in the collapse of Woolworths and MFI last year, but credit insurers themselves have paid out large claims to policyholders affected by failures.Reuse content