Thursday, 23 April 2009

Credit Insurance Top-up Scheme - Darling Disappoints

Further to her posting on 21 April, Fashionista notes that somewhat unsurprisingly the Chancellor's plan to assist suppliers experiencing difficulty obtaining credit insurance has not met the industry's demands.

Under plans announced yesterday, the Government will provide up to £5 billion of extra insurance to top-up cover from insurers in order to help businesses that have been affected by the reduction in availability of trade credit insurance. However, the scheme is restricted to companies experiencing a partial withdrawal of cover between 1 April and 31 December 2009. It does not assist businesses which have had their credit cover withdrawn completely and businesses will only be able to obtain top-up cover for six months. The British Retail Consortium expressed its disappointment saying, "This measure will not address many of the difficulties that have arisen as a result of the restriction in credit, downturn in trading and loss of capacity in the insurance market throughout 2008 and the early part of this year".

Whilst Fashionista accepts that the Government would not want to support fundamentally bad businesses or take unacceptably high risks in providing top-up insurance cover, the scheme does not seem to take any account of the fact that retail businesses have been affected by the downturn in the credit insurance market for many months now and the cut off point of 1 April will not alleviate the concerns of the majority of affected businesses. The Chancellor's plan appears to have fallen well short of the retail industry's demands.