Credit insurance a problem throughout the supply chain
Today's FT suggests that the government will use next week's budget to announce the long awaited government guarantees for credit insurance.
This is something EEF have pushed hard for since the start of the year, as beleagured, yet vital supply chains have been hit hard by the rapid reduction or withdrawal of credit insurance.
Our most recent Business Trends results show that over two-thirds of companies for whom credit insurance is an issue had been hit by a decrease in its availabilty. The problem for manufacturers and their supply chains is that the reduction or withdrawal of credit insurance cover increases the risk that a company will be stuck with a loss if its customers can't pay up. This simply compounds cash flow problems which are then feed down supply chains.
From our own conversations with officials, we think that the government scheme, though modest, could help slow the process of removing cover and so hopefully mitigate the damage on supply chains. The plan isn't a silver bullet or costly panacea for the credit insurance problem, but it doesn't need to be. Manufacturers are simply looking for temporary patch to protect supply chains until demand picks up and cash flow problems ease.
On the day of the Budget, we'll provide commentary on specific items and proposals, so check back here next Wednesday for more detailed thoughts on the government's credit insurance proposals.