Trade credit insurance provides protection for businesses when customers do not pay their debts owed for products or services. But due to Covid-19 and businesses struggling to pay bills, businesses have faced the risk of credit insurance withdrawn, or premiums increasing to unaffordable levels.
The government has stepped in with its trade credit reinsurance scheme, which should ensure that the vast majority of trade credit insurance coverage is maintained across the UK.
Businesses do not need to apply directly to this scheme, as support will be administered directly between the government and available insurers operating in the UK market.
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, BEIS said.
Andy Mitchell, co-chair of the Construction Leadership Council (CLC), said: “Trade credit insurance plays a significant role in construction, giving businesses the confidence to trade with one another. Our Industry Recovery Plan seeks to provide the construction industry with the tools and support they need to get back to work. The launch of this government-backed guarantee to support the provision of trade credit insurance is therefore a welcome announcement.”
Builders Merchants Federation chief executive John Newcomb chairs the CLC Covid-19 task force’s insurance and surety working group. He said: “The construction industry is one of the largest users of trade credit insurance accounting for some 30% of the market. Amongst other things, trade credit insurance gives builders’ merchants the confidence to trade freely with SME building firms who largely operate in the residential sector. The government-backed guarantee will keep cash flowing through the building materials supply chain and protect thousands of jobs.”