Announcing the temporary support in June, Business Secretary of State, Alok Sharma, declared Trade Credit insurance to be “essential” in non-service sectors such as manufacturing and engineering and a “daily necessity”. The Government’s financial backing for insurers operating in the UK market and offering Trade Credit insurance was to be made available for nine months and backdated to April 1, 2020, so as to maintain liquidity within the UK supply chain.
The potential to extend the scheme beyond December 31, 2020 was mentioned and it was said that a review of Trade Credit insurance would be carried out following the end of the current arrangement. The Association of British Insurers’ Director, General Insurance Policy, James Dalton, said: “Maintaining cover as far as possible between suppliers and their clients will be a key component in allowing the UK economy to overcome the challenges of the current crisis.” Unfortunately, objections by the European Commission (EC) led to a Trade Credit Reinsurance Scheme is Good News for British Businesses delay in the scheme’s implementation, with the scheme only gaining agreement from the EC on 29 July, 2020 when the Commission ruled the
scheme compatible with principles set out in the EU Treaty12.
The scheme’s introduction was met with support from trade bodies such as the British Toy and Hobby Association. Natasha Crookes, the BTHA’s director of public affairs and communications, said: “It is news we have been awaiting for some time and I hope it can support the toy industry to trade more effectively over the coming months.” The situation, as of September 14, 2020, was that nine insurers had registered for the scheme and are now participating in it.
In answer to a question in the House of Commons, posed by Chris Elmore, Opposition Whip (Commons), Shadow Minister (Scotland), the Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Paul Scully, said: “At present, insurers serving over 80% of the market have signed up to participate in the scheme.” The business community has viewed the scheme as good news, allowing many British businesses to have more confidence in their business arrangements, knowing invoices will be paid.
The insurance cover steps in when customers do not pay debts, or pay them late, beyond the payment terms and affecting cash flow projections. With Trade Credit insurance’s support, businesses can extend credit terms to new customers and often also access more affordable funding. It is possible to buy cover for all invoice exposures, or just for individual accounts, minimising the impacts of customers’ financial difficulties and possible insolvency – vital in the current turbulent economic times. The cover also allows a business to have some control over factors outside of their control, such as political unrest, disasters and currency shortages, which can all affect payments.
Discovering what Trade Credit insurance can do for them is likely to become a more attractive proposition for businesses during current times. Taking a step to cover liabilities, in terms of potentially unpaid invoices, could be one that means business survival.
To find out more about Credit Insurance contact Willis IRM on 02890329042 or use the form below.