UK retailers are calling on the government to extend the scheme that guarantees trade credit insurance amid fears they could be unsupported when it ends.
The trade credit reinsurance scheme was introduced by the government in May 2020 in response to the pandemic, offering guarantees to insurers who cover suppliers against the risk of non-payment by their customers.
The scheme was extended in December but the government confirmed that it would end on June 30, alongside the commercial rent moratorium.
The British Retail Consortium has written to business minister Paul Scully arguing that if insurers base risk assessments on retailers’ recent financial performance, many will be left exposed, according to the Financial Times.
The BRC said that insurers need at least six months’ worth of consistently strong trading data to reassess coverage decisions, adding that even where such data existed, insurance companies have been slow to revisit underwriting decisions.
There are concerns that lenders will be nervous about extending uninsured credit to retailers after over a year of struggling with coronavirus restrictions. That could leave some businesses having to pay upfront as they build up their inventory in the run in to Christmas, tying up vital cash.
Euler Hermes, one of the UK’s biggest trade credit insurers and a participant in the reinsurance scheme, told the FT it expects economic and corporate credit risks to remain at high levels “and recognises these continue to be challenging times for many companies”.
“We are already in contact with our customers and business partners, helping them to create a smooth transition”.
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