TCI provides cover to hundreds of thousands of business to business transactions, particularly in non-service sectors, such as manufacturing and construction. It insures suppliers selling goods against the company they are selling to defaulting on payment.

As of April 2020 there was over £171bn business activity insured, covering transactions between around 13,000 suppliers and 650,000 buyers.

However due to coronavirus and businesses struggling to pay bills, businesses risk having credit insurance withdrawn, or premiums increasing to unaffordable levels.

To prevent this from happening, the government will temporarily guarantee business-to-business transactions currently supported by TCI, ensuring the majority of insurance coverage will be maintained across the market.

The UK move follows similar action in other European countries, and Canada, where state- backed schemes have been developed to help businesses continue to benefit from affordable trade credit insurance protection.

John Glen, economic secretary to the Treasury, said: ‘This country’s businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time.

‘By guaranteeing business-to-business transactions currently supported by Trade Credit Insurance, we will help to maintain a vital cog in our economy.’

The guarantee will be delivered through a temporary reinsurance agreement with insurers currently operating in the market.

The government says it will work with businesses and the industry on the full details of the scheme to ensure firms are supported and risk is appropriately shared between the government and insurers.

The guarantees will cover trading by domestic firms and exporting firms and the intent is for agreements to be in place with insurers by end of this month.

The guarantee will be temporary and targeted to cover Covid-19 economic challenges, and will provisionally last until the end of the year.

It will be followed by a review of the TCI market to ensure it can continue to support businesses in future. Further details will be announced in due course.

James Dalton, the Association of British Insurer’s director of general insurance policy, said: ‘This is a welcome step by the government, which mirrors similar action being taken by other countries across the world, which are facing the same issues as the UK trade credit insurance market in these exceptional times.

‘The priority now is to urgently work through with the government how this scheme will operate in practice so that it can support businesses through the difficult trading environment, now and in the months ahead.’