Britain to provide more support to companies hit by coronavirus
The government will guarantee $12.5 billion in trade credit insurance schemes, which protect firms from defaults or delays in payment
Britain’s government provided more support to businesses hit by the coronavirus crisis, saying it would guarantee up to 10 billion pounds ($12.5 billion) in trade credit insurance schemes, which protect businesses against defaults or payment delays.
Trade credit insurers had started limiting the cover they provided to businesses in sectors hit hard by the coronavirus pandemic, because of fears of insolvencies, industry sources said.
The state guarantees meant the vast majority of coverage would be maintained, the government said in a statement on Thursday.
They were available on a temporary basis for nine months, backdated to April 1.
Business minister Alok Sharma said the announcement would allow businesses to continue to trade and maintain liquidity in their supply chains.
“This reinsurance scheme is an important step as we carefully set about firing up our economy as we emerge from the pandemic,” he said.
Several countries including France, Germany and the Netherlands have introduced similar schemes, and Britain has also expanded its export credit guarantee scheme, which typically supports trade in developing markets, to cover developed markets. Business groups welcomed the announcement. “To help the economy get up and running again, maintaining confidence in supply chains is crucial, and we are encouraged to see this come as the product of collaboration between government and industry,” Allie Renison, head of trade policy at the Institute of Directors, said.
“This will help our customers through this difficult period,” said Milo Bogaerts, chief executive of trade credit insurer Euler Hermes UK.
Tradecreditinsuranceunderwritesanestimated 350 billion pounds of economic activity of more than 630,000 businesses in Britain each year, the government said in its statement.
The support follows “weeks of intensive discussions” between insurers and the government, trade credit insurer Atradius said.
Meanwhile, Bank of England (BOE) urges banks to be ready for no-deal Brexit. Banks should prepare for the possibility of a no-deal in post-brexit trade talks between Britain and the European Union, the Bank of England said on Wednesday.
Britain left the EU in January but is covered by a transition period that is due to end on Dec. 31. Talks on a future trading relationship between Britain and the EU entered a fourth round this week.
“It is fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face,” the BOE said in a statement.
BOE Governor Andrew Bailey held a conference call on Tuesday with Britain’s biggest banks in which he emphasised the need to step up their plans for a no-deal Brexit, Sky News reported on Wednesday.
The BOE said it meets the leadership of UK banks on a very regular basis.
“As we have said previously, the possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months,” the BOE said.
Barclays and RBS declined to comment. HSBC and Lloyds were not immediately available for comment.
Britain wants binding commitments from the EU on financial market access to avoid the country’s finance industry suddenly being cut off from the bloc, which is a major export market for British financial services.
But the EU has said that British banks, insurers and asset managers face the limited kind of access given by the bloc to the United States, Japan and Singapore.
Senior sources at two major banks told Reuters they had been preparing for a long time to cope with a no-deal Brexit from an operational perspective, after relocating Uk-based staff and management to new offices in the EU.
Britain’s financial services minister John Glen said on Wednesday that the country’s financial services industry was “world class” and was ready for whatever Brexit outcome.
“I continue to believe that we are still well placed as a sector, whatever the specific outcomes are of negotiations ahead of us in the second half of this year,” he said on a webinar.
Britain still expects to secure a comprehensive free trade agreement with the EU, Glen said.
A senior EU official said last week that Britain’s financial services sector should be ready for a no-deal Brexit.
Meanwhile, British new car sales tumbled by an annual 89% in May, only slightly less negative than April’s record 97% collapse, as car dealerships remained shuttered by the government’s coronavirus lockdown, industry data showed on Thursday.