The government has agreed to temporarily guarantee trade credit insurance for businesses struggling to get cover due to Coronavirus.
The cover relates to both domestic and exporting firms in the supply chain who are involved in business-to-business transactions at a time when payment defaults are increasing.
These firms are a “a vital cog in our economy,” according to Economic Secretary to the Treasury John Glen.
The government has agreed a temporary reinsurance arrangement with established trade credit insurers that will launch at the end of May.
The Treasury said the deal would “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.”
Pricing the risk
The move comes after lobbying by insurers experiencing difficulties pricing the risk of providing cover against default of payments to businesses in the supply chain, particularly in manufacturing and construction.
It also comes in the week that those two sectors begin to emerge gradually from lockdown.
‘Insurance is essential’
The Institute of Export & International Trade said today’s announcement was important for ensuring international trade continues through the COVID-19 disruption.
“The continuation of a viable trade credit insurance market is essential for UK businesses and maintaining supply chains,” said Kevin Shakespeare, the IOE&IT’s director of stakeholder management.
“For businesses selling in the UK, EU and the rest of the world there are benefits to using trade credit insurance to support payment terms, mitigate payment and country risk and in some instances support provision of finance for both UK and overseas sales.”
