The government is to temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance.
Trade Credit Insurance insures suppliers against a customer defaulting on payment and helps give businesses confidence to trade with each another.
As of April 2020, more than £171bn of business activity was insured, covering transactions between around 13,000 suppliers and 650,000 buyers, according to the Treasury.
The government has said its support will help supply chains that rely on Trade Credit Insurance. Due to the coronavirus outbreak, some businesses are struggling to pay bills and risk having credit insurance withdrawn, or premiums increase to unaffordable levels.
Under the new scheme, the government will temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance through a temporary reinsurance agreement with insurers.
The guarantees will cover trading by domestic firms and exporting firms, and it is hoped agreements will be in place with insurers by the end of this month. The government said it would work with businesses and the industry on the full details of the scheme to ensure firms were supported and risk was shared between the government and insurers.
“This country’s businesses are crucial in helping us to kick-start the economy,” said economic secretary to the Treasury John Glen. “By guaranteeing business-to-business transactions currently supported by Trade Credit Insurance, we will help to maintain a vital cog in our economy.”
The move has been welcomed by the Food & Drink Federation.
“We are delighted that the government has introduced a guarantee scheme for Trade Credit Insurance,” said chief executive Ian Wright.
“It is news that will be warmly welcomed by food and drink manufacturers of all sizes, and an intervention we have been calling on government to introduce since lockdown first began. We look forward to working with the Treasury on the details.”