The government's long-awaited scheme to help suppliers crippled by reduced credit insurance has been slammed for being overly restrictive and expensive.
The Department for Business Enterprise and Regulatory Reform's (BERR's) £5bn top-up scheme, announced in last month's budget, only benefits manufacturers that have had their cover withdrawn since April 1 and excludes exporters, which the Food and Drink Federation (FDF) described as "highly disappointing"
"We do welcome the announcement, as we have been campaigning for BERR to help our members since the beginning of the year," said Charlotte Lawson, director of member services at the FDF. "We just hope that there will be no delay in getting help to firms that critically need it now."
Insurance broker Aon also warned that the "top-ups would be very expensive". Over a six-month period, it will cost 2.3% of the insurance limit offered by the government - 2% of which goes to the government and 0.3% to a credit insurer for administration. This is an additional expense, on top of the cost of the insurers' cover, which is proportionate to a company's turnover.
A similar scheme was introduced in France last year, said Susan Ross, director at Aon trade credit. But it was much cheaper, as the rates are 1.5% per year compared with 4.6%.
A BERR spokeswoman said: "If cover provided by a policy is reduced from £100,000 to £80,000, then a manufacturer can buy top-up insurance to cover the reduced £20,000." The scheme does not help firms that have had cover withdrawn completely to "protect the tax payer"