15 April 2009 | Martha McKenzie-Minifie
A state guarantee scheme to underpin supply chain insurance is hinted to be part of next week's Budget.
The scheme, reported in today's Financial Times as a "centrepiece" to the Budget, would aim to protect companies that supply goods on credit against the risk they will not be paid. Many businesses have been threatened by the reduction of credit insurance since the start of the economic downturn.
Companies are less likely to do business with suppliers if they cannot get the insurance to cover them.
It was understood details were yet to be finalised but the scheme may fall short of the £5 billion cap that industry hoped for.
In a letter to Prime Minister Gordon Brown ahead of November's pre-Budget report, the CBI said the "worrying trend" had seen insurers become less prepared to cover small suppliers against the risk of larger customers going out of business.
A spokesman for manufacturer organisation EEF told SM that many of the businesses suffering were "viable" small to medium-sized firms with "good track records" yet were unable to get cover.
They formed the backbone of industry, said the EEF, and were key in much larger supply chains.
The EEF lobbied for measures to underwrite trade credit insurance in its Budget submission to chancellor Alistair Darling.
In January, Lord Mandelson, the business secretary, emphasised his concern about the "immense financial distress" being placed on companies by the loss of the cover.