The Government this week ruled out providing cover for companies whose suppliers’ insurance had been pulled - as yet more businesses had their cover withdrawn or reduced.

In January, it was reported that the Government planned to part-support some companies’ credit insurance, after insurers started withdrawing or reducing it, leaving suppliers without protection if their customers folded.

However, last week Trade Minister Lord Davies indicated the Government would not offer specific intervention to tackle trade credit and this week a Government spokeswoman said it had ruled out providing cover for those whose suppliers’ insurance had been withdrawn.

“We cannot offer blanket protection in situations where insurance is removed - that would not constitute a fair use of taxpayer resources,” she said.

“Credit insurance is a complex issue and it’s important we carry out a full analysis to ensure we deliver the type of help firms need while offering value for taxpayers.”

This week, Euler Hermes - one of the big three insurers - cut cover to McCain, citing outdated accounts as a concern. Suppliers to Innocent have also reported having their trade credit insurance withdrawn.

The cuts in credit insurance have come just as companies need cover most. As a result of the credit crunch, some companies have increased payment times to their suppliers. When this happens, the credit offered by suppliers to their customers also goes up - meaning they need more cover.

Carlsberg’s suppliers were last week informed in a letter from procurement director Kevin Murray that the beer group was extending its standard payment terms. Payment will now be made within 95 days of the end of the month in which the invoice is received - leaving suppliers waiting up to four months for payment.

Premier Foods, the UK’s biggest food company, is one of the highest-profile businesses to have had its cover reduced.

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