UK: Trade Credit Insurance backed by £10 billion guarantee. Hauliers welcome the pledge
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The British government is going to provide guarantees of up to £10 billion to Trade Credit Insurance schemes for business-to-business transactions. RHA welcomes the pledge.
Trade Credit Insurance, which provides essential cover to hundreds of thousands of business-to-business transactions, will receive up to £10 billion of government guarantees, ministers announced today. The scheme, which has been agreed following extensive discussions with the insurance sector, will see the vast majority of Trade Credit Insurance coverage maintained across the UK.
The guarantees will support supply chains and help businesses during the coronavirus pandemic to trade with confidence, safe in the knowledge that they will be protected if a customer defaults or delays on payment.
How does Trade Credit Insurance work?
Trade Credit Insurance underwrites an estimated £350 billion of economic activity of more than 630,000 businesses in the UK each year. It insures suppliers selling goods against the company they are selling to, defaulting on payment, giving businesses the confidence to trade with one another.
Due to coronavirus, businesses are struggling to pay bills, therefore, there is a risk of credit insurance being withdrawn or premiums increasing to unaffordable levels, which could cause serious issues for liquidity and working capital across business supply chains. The scheme will be delivered through a reinsurance agreement that is open to all insurers currently operating in the UK market, covering both domestic and overseas trade with payment terms of up to 2 years
To protect businesses that the private credit market cannot insure, export credit insurance is also available from UK Export Finance to cover UK exports to 180 countries. Government-backed export insurance from UKEF can protect the 230,000 businesses that export from the UK against the risk of not getting paid when selling internationally
Hauliers desperately need support
The announcement follows months of intensive lobbying by the Association on behalf of the entire UK haulage industry. We have been asking the government to do more to help operators through the COVID-19 crisis as they gear up to drive economic recovery” – RHA chief executive, Richard Burnett said
Last week, an RHA survey of 600 road haulage operators revealed that the vast majority are still struggling after pandemic lockdown measures have seen volumes collapse.
Sixteen percent of operators claimed they could be insolvent within four weeks, with government furlough payments and bounce back loans only offering a temporary reprieve.
The RHA has been lobbying government tirelessly on this issue and today’s news will come as a shot in the arm for thousands of road transport operators” – Richard Burnett continued. „If the economy is to get back to its pre-pandemic levels, supply chain confidence is vital and we are pleased that our efforts to achieve this have, quite literally, paid off.”