The industrial recovery from Covid will be damaged if government does not extend the Trade Credit Reinsurance, a trade body has warned.
The Confederation of British Metalforming (CBM) has been lobbying Whitehall to extend the support until the end of the year to help companies fighting back from Covid in the face of rising material prices, paying back debt from the pandemic, and navigating the end of furlough.
CBM president Steve Morley said removal of the intervention will see insurers remove credit insurance that covers manufacturers from the threat of bad debt.
“This is the biggest threat to industry’s recovery, it’s as simple that,” Morley said in a statement. “There are lots of positive signs around volumes, new car model introductions and of course the emergence of the UK’s electrification industry. However, firms are still finding it really tough, and they need protection against bad debts from their customers and their invoice discounting facility, which can be affected by the removal of credit insurance.”
He continued: “The government scheme gave insurers the confidence to cover manufacturers and we are already seeing examples of these same insurers withdrawing cover now that the deadline of June 30th is approaching.
“We were told that we can’t get sector specific support, which seems crazy considering all of the rightful assistance retailers have received. It’s not a case of asking for handouts, just a level playing field that gives firms the opportunity to trade their way out of the recovery.”
Brandauer CEO Rowan Crozier added: “The automotive supply chain has struggled to retain full cover even with existing government support, so the removal of the scheme at the end of this month will put further pressure on an already strained sector.
“Cash is king and the absence of bridging cover will mean negotiating different terms with both customers and suppliers, resource many firms do not have when trying to contend with the demands of Covid-19 and Brexit paperwork.
“The government has a few weeks to step back from what will be a massive mistake and maintain the Trade Credit Reinsurance scheme for the remainder of the year, keeping in place a vital tool that is helping industry navigate a volatile economic phase.”
In May, 2021 BEIS and the Treasury said: “Given the positive outlook for economic recovery in 2021, the successes of the scheme in maintaining cover in the credit insurance markets, appetite for new business within participating insurers, and the continued successes of the vaccine rollout now is the right time to begin winding down government support.”