10 June 2009 | Martha McKenzie-Minifie
The government is extending a credit insurance scheme to support suppliers struggling with cash-flow problems.
Trade credit insurance policies protect vendors against the risk of customers failing to pay bills or going bust. However, some companies have had difficulty getting insurance cover in the current economic crisis.
The government unveiled a £5 billion guarantee scheme in its Budget to provide "breathing space" for businesses, initially only available to firms affected by reduced cover since 1 April. This has now been extended to include firms that have had cover reduced since 1 October 2008.
Business groups had criticised the 1 April cut-off when the initiative was unveiled. Roy Ayliffe, CIPS director of professional practice, said: "CIPS was disappointed the scheme was only open to those companies affected since April this year. If a supply chain fails, a business fails. This is an improvement but it's a sticking plaster treating the symptoms - the flow of credit still needs to improve."
Business Secretary Peter Mandelson (pictured) announced the change yesterday and said the extension would give more SMEs "flexibility to respond to a reduction in their credit insurance cover".
CBI director-general Richard Lambert said it gave companies "more certainty about their ability to trade".
Nick Starling, director of general insurance at the Association of British Insurers (ABI), said trade credit firms were committed to supporting clients when trading was difficult.
The latest ABI figures showed the number of trade credit insurance claims rose 51 per cent in the last quarter of 2008, compared with the same period a year earlier. The value of trade credit claims in the last quarter of 2008 was £360 million, up from £257 million in the same period a year earlier.