The Government is next month expected to make provisions for trade credit insurance to ease the pressure on UK businesses that have been left exposed by the underwriters' reduction in cover.
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The largest credit insurers have systematically reduced the lines offered to businesses in the UK and the IT sector has not been immune to this; only recently Euler made cuts that could impact 20% of distributors.
According to industry sources, the Budget will include some measures to tackle the issue which has permeated every corner of the commercial landscape, but it is not clear how close to the French experiment it will be.
A spokeswoman at the Department for Business, Enterprise and Regulatory Reform (BERR) was unable to detail the initiatives but admitted it was aware of the problem faced by those companies relying on credit insurance.
"Credit insurance is a complex issue and it's important that we carry out a full analysis to ensure we deliver the type of help firms need whilst offering value for the taxpayer," she told MicroScope.
"We are working in partnership with the credit insurance industry to find a collaborative way to alleviate the pressure being felt on supply chains throughout the UK," she added.
It is believed that the Government may match the existing level of credit insurance currently available but BERR confirmed.
"We cannot offer blanket protection in situations where insurance is removed, that would not constitute a fair use of taxpayers money. We want to allow businesses breathing space to reach new arrangements with lenders and suppliers," she added.
The French Government has intervened to offer trade credit insurance as a last resort but Martin Williams, managing director at credit reference agency Graydon UK said this was not an easy option.
"If the UK Government steps in to provide cover for companies that the insurers refused to and things go bad, the tax payer will be left to foot the bill. It might work if there is collaboration between the private sector and the Government," he said.
One of the criticisms the channel has levelled at the underwriters is the broad brush strokes they have made in some instances to reduce cover in the market and this penalises companies that have built strong businesses.
This has led more and more distributors to self-insure individual risks and build up a bad debt provision should the worst case scenario materialise, said Williams.