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Government to guarantee business-to-business transactions currently supported by Trade Credit Insurance

The Government will supply thousands of businesses with Trade Credit Insurance to ensure that they can continue to trade with confidence, it has been revealed.

Trade Credit Insurance provides cover to businesses in primarily non-service sectors, such as manufacturing and construction, by insuring suppliers selling goods against the company they are selling to defaulting on payment. The insurance can be used to cover business to business transactions both in the UK and overseas.

According to recent figures, Trade Credit Insurance covers around £171 billion in trade each year, while insurers paid out around £450 million in claims in 2018.

However, during the coronavirus, business owners may struggle to cover insurance payments and risk having their insurance withdrawn, resulting in higher premiums as more businesses default on payments.

To prevent this cycle, the Government said it will “temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance”, ensuring the “majority of insurance coverage will be maintained across the market”.

This will be achieved through a “temporary reinsurance agreement with insurers currently operating in the market”, said HM Treasury.

It is believed that the measure will last until the end of the year.

Welcoming the announcement, British Chambers of Commerce (BCC) Director General Adam Marshall, said: “The launch of a government-backed guarantee to support the provision of trade credit insurance will help ensure that this vital lifeline remains available to businesses during and after this crisis, helping to maintain supply chains and trade.”

CBI Chief Economist Rain Newton-Smith added: “This intervention will keep cash flowing within critical supply chains and more importantly, it will help lower risk for our exporters and ensure that UK firms can continue to trade with other countries.”

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John Morgan

John Morgan

Senior Associate – Corporate / Commercial at Mander Hadley Solicitors
A law graduate of Warwick University, I trained and qualified as a solicitor in London in 1977 before spending several years in the Middle East where I acted on major corporate, commercial and banking transactions, many with an international aspect.

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