An estimated £31 million is expected to be paid by trade credit insurers to help firms in the supply chain recover from the collapse of Carillion, the Association of British Insurers has announced.

The ABI said sums ranging from £5,000 to several million pounds are being paid to firms which had insurance policies against bad debts.

Trade credit insurance covers firms against the risk of not being paid for goods or services that they provide, following an insolvency, protracted default or political upheaval.

Mark Shepherd

Mark Shepherd, assistant director, head of property, commercial and specialist lines, at the Association of British Insurers, said: “The demise of Carillion is a powerful reminder of how trade credit insurance can be a lifeline for businesses in these uncertain trading times. This insurance is an essential business tool that helps firms trade and expand in the UK and overseas. For all businesses, large or small, bad debt could easily put their day-to-day operations at risk, threatening the jobs of their employees. One insolvency can risk a domino effect to hundreds of firms in the supply chain. Trade credit insurance is an essential resource that provides businesses with the confidence to trade, secure in the knowledge they are financially protected when insolvencies occur.”

Trade credit insurance covers against the risk of not being paid for goods or services that businesses sell, which may arise as a result of insolvency, protracted default or political upheaval. It is available to businesses of all sizes, from SMEs, to large corporates and international businesses across any sector that supplies goods or services on credit terms.

Latest figures show that, in 2016, trade credit insurers paid out £210 million to businesses due to non-payment.

However, most of Carillion’s suppliers risk getting little or nothing back, as only a minority of firms had the cover.

Carillion went under last week with £1.5 billion of debt, leaving its 30,000 suppliers facing loses.