More than 630,000 UK businesses have been given the confidence to trade during Covid-19 after the Government announced guarantees of up to £10 billion to Trade Credit Insurance schemes.
Trade Credit Insurance enables businesses to trade safe in the knowledge that they will be protected if a customer defaults or delays on payment.
According to the latest statistics, the sector underwrites an estimated £350 billion of domestic and international economic activity of more than 630,000 businesses in the UK each year.
However, Covid-19 disruption has forced thousands of businesses to stop trading, resulting in higher rates of insolvency and non-payment. Experts said this was likely to increase the risk of credit insurance being withdrawn or premiums increasing to unaffordable levels, “which could cause serious issues for liquidity and working capital across business supply chains”.
To combat this, the Government’s £10 billion support scheme will guarantee the “vast majority” of transactions across the UK.
The reinsurance scheme, backdated to 01 April 2020, will run for nine months until 31 December 2020, with “potential for extension if required”.
Welcoming the announcement, Confederation of British Industry (CBI) Director of Financial Services, Flora Hamilton, said: “The new government guarantee to backstop trade credit insurance will be welcome by businesses across the UK. The TCI scheme will support supply chains, enable many to prepare for restart in earnest and bring employees off the job retention scheme and back into work.”
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