The UK government has refused to be drawn on whether it will extend the current reinsurance agreement with trade credit insurers, according to the latest Budget unveiled by Chancellor of the Exchequer Rishi Sunak
The current scheme was introduced in June 2020 to ensure coverage for vulnerable businesses and protect against the impact of insolvency.
Under the scheme, the government assumes the majority of losses arising from insurance claims between 1 April 2020 and 30 June 2021, up to a total of £10 billion in insurance claims.
Up to £190 billion of cover on businesses has been provided under the scheme, according to the government, which claims that had it not moved swiftly to support the market, it is estimated up to £50 billion of crucial cover on around 155,000 business would have been at risk:
“The Trade Credit Reinsurance scheme has successfully maintained the vast majority of trade credit insurance coverage across the market throughout the pandemic, across the whole of the UK.”
However, in the relevant section in this year’s Budget little was given away on the whether businesses and insurers can expect any extension:
“The government will continue to review the impacts of the scheme to assess whether there is a case for further interventions beyond the scheduled end date of 30 June 2021, in order to minimise disruptions in insurance coverage as the economy recovers.”
Giving his budget speech in the Commons, Sunak said he would continue to do “whatever it takes” while it took time for growth to bounce back after restrictions have been lifted. “It’s going to take this country, and the whole world, a long time to recover from this extraordinary economic situation. But we will recover,” he said.
The rate of corporation tax, paid on company profits, is to rise to 25% from 19%, starting in 2023. The chancellor said it was “fair and necessary” for business to contribute to the economic recovery.
He also unveiled a “small profits rate” to benefit small firms, and extra tax breaks to spur investment.
Paul Johnson, director of the Institute for Studies, said the rise in the headline rate was at the top end of expectations, calling it “risky”.
Sunak maintained that even with the rise to 25% “the UK will still have the lowest corporation tax rate in the G7” group of leading nations.
“The government is providing business with over £100bn of support to get through this pandemic, so it is fair and necessary to ask them to contribute to our recovery,” the chancellor told the Commons.