The Government is reassessing its credit insurance top-up scheme as it emerged only a handful of businesses have taken up the scheme.

The Government is now believed to be urging businesses to find alternative ways of managing their risk other than turning to credit insurers.

Sources close to the Department for Business, Innovation and Skills (BIS) said the Government had admitted there are “fundamental problems” with the way such insurance firms operate, referring to credit insurers as “fair weather friends”.

A BRC report revealed more than half of large retailers found the reduction or withdrawal of credit insurance had undermined their ability to trade in the past three months. Retailers including Focus and First Quench have suffered after having insurance cut, and the withdrawal of cover on Woolworths was seen as part of the reason why it collapsed.

The BRC welcomed last month’s announcement that the trade credit insurance top-up scheme is being backdated to 1 October, but is calling on the Government to extend the date to 1 April 2008 – when insurers began removing cover as the downturn began.

Jane Milne, BRC business environment director, said: “For retailers to survive the current tough trading conditions and keep staff in work they need have to have sufficient stock. This is especially important in the run up to Christmas – which is the most important trading period for most retailers.

“Extending the trade credit insurance top-scheme will help, but we’re calling on the Government to extend the scheme to last April – when the recession started to bite.”

Ministers met last week to discuss how to formulate a new credit insurance model. The source added the Government recognised its scheme “has not been a raging success”.

A BIS spokeswoman said: “We will be keeping the scheme under review and will consider changes as appropriate.” However, any changes will not include helping companies that have had their credit insurance removed completely.

The BRC said more than two thirds of large retailers believe credit insurers are not in a position to assess risk accurately.

Deferring the bill

The BRC expects several retailers to postpone 3 per cent of their business rates bill as the Government deferral scheme launches today.

In a victory for Retail Week’s Rate Rage campaign, the Government bowed to pressure and agreed to allow businesses to put off some of their payments.

The BRC said it had received a “positive response” from a number of small and large retailers.

Halfords is choosing to defer, despite the scheme’s complicated nature. Finance director Nick Wharton said: “It’s a cash flow benefit, so we’ll go through the hoops.”

Kingfisher chief executive Ian Cheshire said more needs to be done. “The deferral is still an uplift of 5 per cent at a time of no inflation – it is just being spread over three years.”

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