Update 3 January 2021: This article was originally posted on 16 December, and the Government has since confirmed the extension until 30th June 2021.
Supporting trade credit insurance is a key tool in the UK Government’s armoury for boosting business’ confidence and ability to trade during the pandemic. Several countries have implemented similar schemes to the UK’s reinsurance scheme, which backs trade credit insurers to the tune of £10bn until the end of 2020.
With calls across Europe for schemes to be extended, it seems likely the UK will extend their scheme until 31 June 2021. Germany has already proposed a 6-month extension, which is awaiting European Commission approval.
While the number of insolvencies is remarkably low at present, a spike is anticipated in the next 6 months.
Credit insurers might expect to pay total claims in any year of between £200m – £250m. Ben Leich, Head of Trade Credit Reinsurance at BEIS, mentioned during an informal discussion with The Channel Partnership that while the UK Government reinsurance scheme is a £10bn fund, claims under the scheme are anticipated to be between £1bn and £2bn. That’s between 4 and 8 times higher than a typical year. The Germans have set aside €30bn.
The trade credit insurance industry in the UK covers about £100 billion of exposure – supporting companies with a combined turnover well in excess of £200 billion. It’s oil that keeps wheels turning, and the extension is great news for the country.
Indeed, since the scheme was launched, the trade credit industry has been able to maintain exposure close to pre-pandemic levels, and will be able to continue to support businesses well into the coming year.
This taxpayer backed credit insurance support for companies is available to existing clients of The Channel Partnership and to companies interested in finding out more.
Please contact Tom Rolfe / Andrew Smith for more information.
Tom Rolfe | tom@the-channel-partnership.co.uk | 07889 659 339
Andrew Smith | andrew@the-channel-partnership.co.uk | 07932 567 900
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