A £5 billion initiative, unveiled as part of Wednesday's Budget, will enable companies which have had their trade credit insurance cover reduced by traditional providers to purchase 'top-up' credit insurance from the Government.

The current economic climate has resulted in insurers increasing premiums or withdrawing from high-risk markets altogether. Many companies, including those operating in the retail and IT sector, have been affected by credit insurers' cutbacks in the face of spiralling claims.

The trade credit insurance top-up scheme is available to eligible companies in the UK with a trade credit insurance whole-turnover policy. The scheme is open to new applicants from 1 May 2009 to 31 December 2009. Those companies who have had their credit limit reduced will be able to purchase top-up cover via existing providers, who will administer the scheme on the Government's behalf.

The Government hopes that the scheme will ease the strain on businesses suffering as a result of the reduction in trade credit insurance; however, some have questioned whether the scheme goes far enough.

The scheme has faced criticism as it does not address the needs of companies whose limits have already been withdrawn as opposed to reduced. In addition, some companies will be frozen out from the scheme because their cover was reduced before 1 April 2009.