£10bn trade credit insurance guarantee to protect supply chains

Taxpayers will protect trade credit insurers from up to £10bn of losses as part of ministers' efforts to keep supply chains moving as the coronavirus recovery begins.

The state guarantee is intended to give providers confidence to keep providing cover for about 630,000 British businesses which sell goods worldwide - preventing a shutdown which could hammer exports.

Trade credit insurance is a vital part of the global system and gives firms selling overseas the certainty that they will be paid for goods and services they deliver, even if their customers collapse.

A surge in claims and fears of insolvencies meant trade credit insurers had been limiting the cover they provided to businesses hit hardest by the pandemic. Without this insurance, many exporters felt unable to keep selling abroad.

The government scheme will allow trade credit insurers to buy cover for themselves from the state for both imports and exports, allowing them to keep operating. It echoes initiatives in France, Germany and Canada.

Insurers using the scheme, which will be backdated to April and run until the end of the year, will not be allowed to make profits on business that uses the guarantee.

The trade credit insurer Atradius said the support  followed weeks of intensive discussions between providers and the Government.

Business Secretary Alok Sharma said the move would give peace of mind to hundreds of thousands of businesses, particularly those in the manufacturing and construction sectors.

Allie Renison at the Institute of Directors said: "To help the economy get up and running again, maintaining confidence in supply chains is crucial.

"We are encouraged to see this come as the product of collaboration between government and industry.”