Banks could perform more of the credit insurance services in the timber sector if credit insurers continue with their aggressive withdrawal of cover, a leading timber industry executive has predicted.

Nigel Williams, director of Premier Forest Products, said the company’s bank HSBC had given suppliers irrevocable letters of credit, guaranteeing payment for orders.

His comments come as industry groups – the Construction Products Association, British Woodworking Federation (BWF) and Timber Trade Federation – report almost non-existent take-up of the government’s credit insurance scheme and continued aggressive cover withdrawal by some larger credit insurance operators.

“Clearly, this facility with the banks costs us money,” said Mr Williams, “but if we’re no longer paying the premiums to the credit insurance companies, then we have the money to spend.

“I think we’ll see more of this type of arrangement. If credit insurers aren’t careful, we won’t need them in future.”

British Woodworking Federation chief executive Richard Lambert predicted that in future UK business might have to cope with less credit insurance overall, or even none as in the US market.

“At the moment it looks as though business will have to be much more selective in credit insurance cover and more aggressive in risk management, as they are in America,” said Mr Lambert.

This is something Robbins Timber has found itself doing, with managing director Richard Bagnall saying the company is trading with 20% of its customers at the company’s own risk and restricting trade with some customers.

Mr Bagnall said credit insurers were becoming more aggressive and thought the idea of banks taking their place was a good one.

“We are getting cover withdrawn from customers who we’ve had a relationship with for many years, some for no apparent reason,” he said. “We are getting to the point where we do not need to bother with credit insurance.”

The BWF has unveiled a free credit checking service for members which allows them to carry out credit checks on new and existing customers.

The service, available through www.bwf.org.uk, also provides members with advice on how to interpret financial reports, and the automated system estimates financial risk to give users a clear indication of whether a customer or potential customer is a safe bet.