Credit Insurance
47. The use of credit insurance varies by sector
and size of company. There is conflicting evidence on whether
credit insurance has become more difficult to obtain in the current
economic climate. The West Midlands Developers Alliance said that
credit insurance was very important to the construction sector
and insurance companies had reduced their credit insurance provision
to the sector:
"Insurance companies have dramatically reduced
their willingness to insure trade suppliers, and so the big boys—Jewsons
and Travis Perkins—and some of the large regionals—EH
Smith and people like that who are fairly cash-rich—are
tackling the issue themselves. I think that the smaller suppliers
are really struggling."[48]
48. However, a representative from the automotive
sector did not use credit insurance because the insurance was
extremely expensive even before the credit crunch. The Federation
of Small Businesses reported that "fewer than 20% of our
members say that they use credit insurance" of which 40%
reported an increase in the cost of the insurance and 50% stated
that costs had stayed the same.[49]
49. The Government announced in the 2009 budget that
where insurers had reduced domestic credit insurance to a UK business,
it would match the revised insurance provision up to a maximum
of £1 million for a period of six months. There are limitations
to the scheme, as pointed out by the British Ceramics Confederation:
"If your credit insurance has been withdrawn completely,
as has happened to a number of firms in the construction sector,
those measures do not help because double nothing is nothing".[50]
The Department for Business, Innovation and Skills stated that
take up of the Government's credit insurance provision has been
low, and as a result eligibility for the scheme had been backdated
from May 2009, when the scheme was introduced, to October 2008.
50. The Government launched a consultation on sharing
the risks of export credit with banks on 8 May; this closed on
3 July. Businesses have been frustrated by the slow progress on
export credit:
"We welcomed the news in the pre-Budget report
in November that there would be help for exporters, and our members
were pleased because it would allow them to take advantage of
the drop in exchange rates. However, despite a call to an official
at DBERR and follow-up letters to the Department and Lord Mandelson,
we did not get a reply until recently, and that said just that
a consultation is starting now. It feels like too little help,
too late."[51]
51. The lack of available export credit insurance
may be hampering regional businesses. The West Midlands Business
Council said that they had been given examples requirement "of
companies turning down quite sizeable orders—£250,000
for example—because they are unable to get export credit
guarantees".[52]
Business representatives said that any hope of achieving an upturn
driven by exports would require export credit insurance due to
the risks involved in supplying new markets and new customers.
52. The withdrawal of credit insurance is of significant
concern to the West Midlands particularly for those sectors such
as the construction and automotive supply chain where the availability
of insurance has disappeared altogether. The Government should
investigate, as a matter of urgency, why take up of its credit
insurance provision has been low and if necessary reassess eligibility
criteria in order to achieve its intended objective. Decisive
action is needed by the Government on export credit guarantees
if it hopes to achieve an export-led economic recovery.
Business Rates
53. Small business rate relief of up 50% is available
to businesses in premises with a rateable value of less than £15,000
(£21,500 in London). However, the relief is not automatic.
Businesses must pay the full rate to their local authority and
then subsequently claim for rate relief if they are eligible.
Less than 50% of eligible rate payers claim relief, leaving over
£400 million unclaimed each year. In their oral evidence
to the Committee the Federation of Small Businesses called for
small business rate relief to be made automatic, or for bills
sent to premises with qualifying rateable values to suggest that
businesses should apply for the relief. Newcastle under Lyme Borough
Council saw a 10% increase in take up of small business rate relief
following a communications campaign which included presentations
to the Chamber of Commerce, dissemination by business advisors,
and features in the council publication and on its website.[53]
54. For 2009-10 the Government has raised the threshold
for rate relief on empty properties from £2,200 to £15,000.
It estimates that this increase will mean that 70% of empty properties
will be exempt from paying rates. The Royal Institution of Chartered
Surveyors stated that "Budget relief measures have not been
substantial enough to counter the harm to the sector which in
regeneration areas includes the demolishing of buildings that
could otherwise be refurbished".[54]
55. Improving the take up of small business rate
relief is an important method of improving the cash flow for small
businesses. Local authority partners should examine ways of improving
the take up of the relief in the region such as by printing details
of the relief on business rate bills that may qualify and through
increased publicity of the relief to business. The Regional Task
Force could help disseminate best practice.
56. We also recommend that the Government reviews
the £15,000 rateable value threshold for small business rate
relief on empty properties.
28 Q 88 Back
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WM 30 Finance Forum Back
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Q 53 Back
31
Q 5 Back
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Q 117 Back
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Q 53 Back
34
Q 52 Back
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Q 53 Back
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Q 54 Back
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HL Deb, 20 May 2009, WA320 Back
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Q 260 Back
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Q 98 Back
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WM 30 Finance Forum Back
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Q 56 Back
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Q 249 Back
45
WM 27 Warwickshire County Council Back
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WM 09 Government Office for the West Midlands Back
47
WM 30 Finance Forum, para 2.5.6 Back
48
Q 65 Back
49
Q 65 Back
50
Q 123 Back
51
Q 122 Back
52
Q 73 Back
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Q 169 Back
54
WM 17 Royal Institution of Chartered Surveyors Back
