The Budget’s help to secure traders’ cover costs three times as much as a similar deal in France

The Government’s trade credit top-up scheme has come under fire for not doing enough to help UK businesses.

Critics attacked the scheme for ignoring the needs of firms that have already had their trade credit insurance pulled.

Only businesses that have their cover scaled back from 1 April to December 2009 will be eligible for the scheme, which is also three times as expensive as a similar scheme announced by the French government.

Peter Staddon, Biba’s head of technical services, said: “I am encouraged that the government have come in and have had a look at [the top-up scheme] but I do wonder whether this is a scheme which will help the insurers and not a scheme which will help UK Plc.”

The scheme – for firms affected for the rest of 2009 – will work by topping up cover for firms that have had their trade credit insurance reduced. Cover will last for six months.

Susan Ross, Aon director of trade credit, said: “With demand falling and credit insurers receiving heightened levels of insolvency claims, we are delighted that the government has realised there is a need for support for trade.

“But we hope that the scheme will be extended to support exports to allow for a time delay to the impact of credit limit reductions and withdrawals and, second, for the government to consider extending it beyond the end of this year in case our economy does not recover as quickly as predicted.”

The top-up will cost around 4.6% of the goods being insured. The French equivalent, Le Cap, is 1.6%.

Business Secretary Peter Mandelson said: "We will not prop up bad businesses or take unacceptably high risks, but will provide targeted support to address specific challenges that businesses are facing and help maintain supply chains.”

The scheme will cost around £5bn. The three major credit insurers – Euler Hermes, Coface, Atradius – are all expected to participate.

Fabrice Desnos, Euler Hermes chief executive, said: “We don’t expect the take-up for the scheme to be very high but if it makes a difference for a thousand SMEs where credit insurance is a significant component of their business model, then it will have been a success.

“Through this top-up scheme, the government is effectively endorsing our risk management decisions. It recognises that some risks will not be worth taking and this is an important point: this scheme is not about bailing out bad businesses; it is all about protecting good businesses.”