Business insurance scheme gets poor take-up

A widely promoted government scheme offering up to £5bn to help protect suppliers from the collapse of their customers has so far provided only £7m of assistance to 52 companies.

Announced in the Budget, the government’s trade credit insurance top-up scheme was designed to shore up the market as nervous private sector insurers cut their exposure during the credit crisis.

On Thursday, the business department said it was widening its criteria and cutting charges to 1 per cent to enable more entrepreneurs to take up the initiative. The paucity of the take-up is an embarrassment for the government, given that it was forced to loosen the scheme once before.

“The scheme is £5bn, but we have never assumed that it would get to that level. That’s the amount in the programme should there ever be sufficient demand,” the business department said.

The scheme allows suppliers to buy six months of government-backed insurance either to restore cover to its original level or to double the amount they can obtain from the private sector. The four largest credit insurers have all signed up to the initiative: Euler Hermes, Atradius, Coface and HCC.

Overall, the private sector provides £300bn of trade credit insurance a year covering transactions by about 250,000 companies.

In June the department bowed to pressure from business to backdate eligibility to include suppliers that had had cover reduced since last October.

The British Retail Consortium, the trade body for retailers, on Thursday welcomed the government’s latest move, but said the scheme needed to be backdated until April 1, when insurers began removing cover.