Government to unveil credit insurance scheme

A state guarantee scheme to protect supply-chain insurance is due to be unveiled in next week's Budget, the Financial Times (FT) has reported.

The scheme is expected to protect the suppliers of small-to-medium-sized businesses against the risk that they might not get paid by their customers, but will only cover 'medium risk' firms that have had their credit insurance reduced rather than cut altogether.

The plan, news of which the paper attributed to 'government insiders', comes in response to concerns from manufacturers over a widespread reduction in credit cover.

The manufacturers' organisation EEF recently warned that "the speed at which credit insurance is being withdrawn threatens the supply-chains that are the heart of the UK's manufacturing base". It called on the Government to minimise the impact on suppliers when credit insurance is cut.

The British Clothing Industry Association also said that "slashed cover" from major credit insurers had "directly lead to job cuts".

Malcolm Tarling from the Association of British Insurers told More Than Business News: "The problem with trade credit insurance has its foundations in the general lack of credit.

"In some areas risk has gone up to levels that mean that insurers cannot provide cover or have had to increase premiums," he said.

"But insurance companies look at each particular risk on its merits rather than black-listing particular sectors as has been suggested."