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Trade Credit Scheme Doesn’t Deal With the Problem

April 29th, 2009

The Government’s trade credit insurance “top up” scheme has been criticised for failing to get to the crux of the problem.

Chancellor Alistair Darling announced the measure – aimed at supporting firms that have had their cover slashed – in last week’s Budget.

From May 2009 until the end of December 2009, suppliers will be able to purchase six-months’ top-up insurance from the Government if credit limits on their UK customers are reduced, backdated to 1 April 2009.

But Specialist Engineering Contractors’ Group chief executive Rudi Klein said insurers were not only slashing the amount of credit insurance they offered, but pricing companies out of the market by setting their excesses unworkably high.

He said: “A lot of companies are being told that they can take out credit insurance, but the excess is going to be moved up to £100,000. So it doesn’t really deal with the problem.”

The Department for Business, Enterprise and Regulatory Reform, which is in charge of the scheme, said the programme was not designed to tackle this element of the industry which it described as the prerogative of the private insurance industry.

Mr Klein also warned that the scheme would isolate companies who had seen their credit insurance pulled altogether.

However, CBI director general Richard Lambert welcomed the scheme. “This targeted ‘top up’ scheme will provide welcome relief for some companies facing short-term working capital constraints, and help restore confidence in supply chains.”

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