West Midlands exporters have said they are being held back in their attempts to help the UK fight its way out of recession by the decision of some brokers to withdraw export credit insurance.
The policies protect businesses against non-payment by their customers, but with the recession taking grip around the world and firms going out of business, some insurance companies are unwilling to cover the debts.
The Midlands World Trade Forum, the region’s largest international trade group, is now working with Birmingham and Black Country Chambers of Commerce, as well as the West Midlands Business Council, to raise the issue with the Government.
Deb Leary, chairwoman of the MWTF, said: “If Britain is to ease its way out of recession then it needs its exporters to be selling around the globe.
“But the withdrawal of insurance cover is holding back the recovery.
“There needs to be an understanding from the Government, especially the Export Credit Guarantee Department of this growing problem.
“The future of many well run and profitable exporting companies will be put under threat if the private insurance they have used for many years is withdrawn, which is why back-up insurance, supported by the Government, needs to be in place as we head towards fragile recovery of the global market,” she added.
A survey of MWTF members showed increases in premiums have either already been enforced or are anticipated once existing agreements come to an end.
These increases vary from 30 per cent to as much as 1,000 per cent in one case.
Premium increases are also going hand in hand with a reduction in the level of cover, thus making the pro-rata increase in the premium significantly more than it first seems.
Insurers are taking a blanket approach when reviewing levels of cover and either reducing or withdrawing cover based on their view of the viability of a sector rather than the financial stability of specific customers.
The withdrawal of £1 million of cover within the first month of renewing their insurance policy was reported by one company, whose areas of business includes the construction sector in Spain.
Cover is also being withdrawn for customers whose filed accounts are more than six months old, which many feel is an unreasonably short period of time to be imposing.
The companies surveyed also reported the complete withdrawal of cover for markets such as Turkey, the Republic of Ireland, Iceland and the Caribbean.
One member reported that its insurer had limited its cover to £10,000 of exports to the USA per year, which of course limits its exports across the Atlantic.
Another had the insurer withdraw more than £1 million of cover within the first month of renewing the policy.
Ms Leary added: “A government backed scheme that is prepared to accept risk and not just cover safe options is needed in order to help companies to export out of the recession.
“When considering any form of export credit guarantee scheme the Government should ensure it is compatible with other initiatives offering support to exporting companies.
“For example, the recently launched initiative aimed at identifying opportunities resulting from Global Fiscal Stimulus Programmes will signpost companies to significant investments that have been announced in the construction sector in France, Germany and Spain.
“If this initiative does not also carry with it the guarantee that companies will be able to obtain insurance cover on new business then the initiative will be of no help to them.”