Government extends credit insurance deal

Peter Mandelson: We are acting decisively to help more businesses

The Government has backdated its credit insurance top up scheme by six months to boost cash flow for firms whose cover was reduced over the winter.

In April's Budget chancellor Alistair Darling unveiled an initiative for companies suffering a reduction in cover between the start of April and the end of the year. Affected firms were eligible to buy a six month top up of up to £1m in Government-backed cover, taken from a £5bn total pot.

Take-up rate for the scheme has been low, with fewer than 20 businesses signing up. But the Government hopes to boost interest by extending the deal to include firms whose cover has been reduced since the start of October 2008.

The scheme will also now be fulfilled by four companies, with HCC International joining the UK's three biggest credit insurers: Euler Hermes; Coface; and Atradius.

The British Retail Consurtium (BRC) welcomed the news but indicated it still fell short of the twelve month extension it has campaigned for. BRC's business environment director Jane Milne called for the Government to lean on insurers to make sure underwriting decisions are fair and accurate.

"Matching the trade credit insurance that private insurers are willing to provide is vital to helping fundamentally sound businesses weather the recession," she added.

"Allowing businesses to nominate the six month period the top up is available will improve the flexibility available to retailer suppliers to get help during their busiest times, such as the run-up to Christmas."

Business secretary Peter Mandelson said: “This extension will give more small and medium sized businesses flexibility to respond to a reduction in their credit insurance cover.

“We are acting decisively to help more businesses and allow them the breathing space to adjust their business models in response to the current climate."