BusinessBusiness RecoveryOnly £18m of £5bn trade credit war chest used

Only £18m of £5bn trade credit war chest used

Trade credit top-up Scheme branded a 'huge waste of funding' which has frozen out needy businesses because of its narrow parameters

£4.98bn of a £5bn war chest offered to companies put on the rack by the
threat of their clients going insolvent remains unclaimed a month before the
scheme closes.

Only £18m has been taken by 72 companies with 104 policies, in the wake of
major collapses of powerful customer groups including Woolworths and Land of
Leather.

The Trade Credit top-up scheme was billed in this year’s budget as a vital
lifeline in protecting businesses from client defaults.

However the terms of the scheme have been panned for being too narrow and the
disappointing take-up has seen industry figures brand the move a failure.

Edward Rimmer, chief executive at Bibby Financial Services, the UK’s largest
company providing advances to businesses waiting on invoices said:

“The figures speak for themselves. Of the £5bn earmarked to support small
businesses, only £18m has been used.

This is a huge waste of funding. Furthermore, the scheme’s eligibility
criteria contains a glaring omission – it doesn’t support businesses that have
lost all of their insurance cover.

“Policies have been pulled en masse by insurers, and in some industries we
have seen an unprecedented number of uninsured businesses who are now being
forced to risk everything.”

Fabrice Desnos chief executive of Euler Hermes the UK’s Britains biggest
insurer said:

“We believe the scheme could have been broader but its parameters were set by
government based on its appetite for trade credit risks.

“The government in particular did not want to substitute itself to the
private market by accepting risks the private market was not prepared to cover
which we always thought to be a sensible and rationale decision.”

“Risks of non payment are still very high and for a lot of businesses
however, there are still considerable uncertainties ahead and we certainly
expect insolvencies to remain high in the foreseeable future.”

The Euler UK boss said two out of three British clients had submitted a claim
during 2009, clearly demonstrating how much risk have sky rocketed in the
period.

BIS, the business department confirmed there were no plans to extend the
scheme into 2010:

“This is a temporary scheme the Department put in place to provide targeted,
transitional support to firms whose cover had been reduced and who needed
support while they adjusted to new conditions.

“To date, 104 policies have been accepted for 72 suppliers and cover to the
value of £18m has been issued. Many businesses have found other ways to adapt
and thus have not needed to take up the Government offer.

“This scheme is due to close to new applications at the end of the year as
set out at its launch.”

Related Articles

EY hired by Carillion to review finances

Accounting Firms EY hired by Carillion to review finances

3m Alia Shoaib, Reporter
Using insolvency as a debt recovery tool

Business Recovery Using insolvency as a debt recovery tool

4m Emma Smith, Managing Editor
UK government should support mid-sized businesses to create a ‘new economy’ post-Brexit, says BDO report

Business Recovery UK government should support mid-sized businesses to create a ‘new economy’ post-Brexit, says BDO report

6m Alia Shoaib, Reporter
Manor Racing Formula One team company enters administration

Business Recovery Manor Racing Formula One team company enters administration

9m Stephanie Wix, Writer
Oil and gas sector insolvencies hit “new high”

Accounting Firms Oil and gas sector insolvencies hit “new high”

9m Stephanie Wix, Writer
Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

Business Recovery Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

7m Emma Smith, Managing Editor
FRP Advisory expands operation with new office, partner appointments

Accounting Firms FRP Advisory expands operation with new office, partner appointments

8m Emma Smith, Managing Editor
Business confidence drops to second lowest level since 2011

Business Recovery Business confidence drops to second lowest level since 2011

9m Stephanie Wix, Writer