Signs that the government will not extend its £5bn credit insurance top-up scheme because it is “no longer needed” have met with derision from the channel.

The initiative, introduced to help businesses suffering from a recession-induced withdrawal of trade credit insurance, is set to close at the end of December.

Since its launch in May, just 72 UK businesses have benefited, with ETC the only IT distributor known to be taking part. Just £18m of the £5bn funds earmarked have been tapped.

Lord Mandelson warned earlier this month that an extension was unlikely, adding that improving market conditions mean “the sort of scheme we put in place is no longer needed”.

VAR Quadnet earlier this year had its credit insurance cover pulled by Atradius. Managing director Zubair Aleem claimed the channel would continue to need all the help it can get.

“We are going to see a lot of resellers go under in the next three to four months ­ if they haven’t already ­ so I think it is a little early to say we are out of the woods just yet,” he said.

Eddie Pacey, director of credit at distribution giant Bell Micro, said that while there are some signs the economy is picking up, Lord Mandelson’s comments were premature.

“While some indices suggest a gradual recovery, banks remain somewhat tight in their lending and credit insurers will not return to pre-recession levels of cover until well into 2010,” he said.

“Funding during growth out of recession is always tricky, and this will still mean problems for some businesses, so further consolidation is inevitable. We will also see weaker structures and businesses fail.”

Pacey blamed the low level of takeup on the fact that the scheme was “largely ill-conceived” despite being “well-intentioned”.

“I have to be honest and say the government scheme did not do much for our sector at all,” he said. “It certainly helped some other sectors, but the overall takeup of the scheme was low generally. Its removal will not make much difference.

It was well-intentioned, but largely ill-conceived and costly, even after adjustment.”

Andy Child, head of global trade credit at insurance broker Aon, said: “A number of people have asked me why the scheme has not worked and it’s simply because it was too costly and restrictive.

“In the early part of the year, a lot of businesses had their credit limits cancelled to zero, anyway, and unless they had a means of increasing it, the scheme was not going to be a lot of use to them.

“In the channel, if you are a distributor working to very fine margins, a two per cent credit limit is an expensive way of insuring your debt.”

Rob Tomlin, business unit director at IBM and Lenovo specialist distributors Interface Solutions, said: “Six to nine months ago it was very difficult for our smaller, up and coming partners, and so, in conjunction with our vendors, we have freed up over £500,000 of uninsured credit for our development partners.

“Things are slightly different now and in recent weeks and months our credit insurers, Euler Hermes and Atradius, have shown a lot more appetite and flexibility to provide and support our partners with cover.”

The government is expected to make a final decision on the fate of the trade credit insurance scheme in December’s pre-Budget report.