The British Retail Consortium (BRC) is demanding that the government act on credit insurance, after half of retailers say its withdrawal is undermining their business.
Half of large retailers, and over 40% of small and medium-sized ones (SMEs) say the reduction or withdrawal of trade credit insurance has undermined their ability to trade, according to a survey by the BRC.
The BRC is demanding that the government use next week’s budget to address the issue and provide top-up insurance to credit insurance cover, which protects suppliers against the risk of not getting paid,
BRC director general Stephen Robertson said: “In these uncertain times, it’s even more important suppliers have the confidence that trade credit insurance brings. Cover must remain available. We’re not expecting the tax payer to take on more risk than private insurers. But, by matching the trade credit insurance that private insurers are willing to provide, the government can help fundamentally sound businesses weather the recession at relatively little cost. Without this backing, the lack of trade credit insurance will threaten the viability of more suppliers and retailers.
Nine out of 10 SME respondents and two-thirds of larger retailers believe that trade credit insurers cannot accurately assess the risk of a supplier not getting paid, according to the BRC’s Credit Conditions Survey published today.
The BRC survey (which is attached in full to the right) says that a third of SME retailers have experienced a contraction in lending by their bank. Of those, 89% said it had affected their businesses, 75% had cut stock and 30% had cut employment.
The BRC said that if credit insurance is withdrawn, suppliers demand to be paid upfront. This can leave retailers short of stock, create cash flow problems and cost jobs as retailers prioritise paying suppliers.
Banks also use retailers’ insurability as one of the criteria for making lending decisions, according to the BRC.
Leading suppliers from across the fashion industry have already joined forces with Drapers and the British Clothing Industry Association (BCIA) to lobby the government over the issue of credit insurance.
The campaign, which is being led by Peter Lucas, chairman of the BCIA who is also chairman of menswear supplier BMB Group, is demanding that the government channel some of the cash set aside to support the UK’s financial institutions into insuring orders from UK retailers.
Lucas sent a letter to Lord Peter Mandelson, secretary of state for business enterprise and regulatory reform, earlier this month, along with a dossier of evidence that the fashion industry was suffering job losses and financial difficulties as a direct result of the credit insurance crisis.
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