The state is becoming businesses’ insurer of last resort. Is this wise?

Trade credit insurance is a key part of Britain’s economic plumbing. It was in danger of springing a leak until the government stepped in with an emergency plug – but it could prove very expensive, writes James Moore

Insurers like Lloyd’s of London are facing huge bills from pandemic-related claims (Reuters)

There are so many things we rely on that we don’t notice until they threaten to break. Plumbing is a good example. Trade credit insurance is a key part of Britain’s economic plumbing. It was in grave danger of springing a leak until the government stepped in with an emergency plug.

Its function is to protect companies against the risk of their customers going bust before paying for goods and/or services. By ensuring they get paid, the insurance allows businesses to trade with each other with confidence and thus assists with the smooth functioning of the economy. Well over half a million firms of them have it.

It doesn’t take the brain of a PhD candidate to see why it’s currently causing a problem. Thousands of companies are teetering on the brink, so many that some of the insurers that sell it could very easily end up joining them.