The chairman of the British Clothing Industry Association (BCIA) Peter Lucas is calling on the government to make a gesture of support to the UK fashion and retail industry by offering credit insurance for domestic orders.
Drapers is backing Lucas’s campaign, which will tell the government it has a duty to channel some of the cash set aside to support the UK’s financial institutions into insuring orders from UK retailers. Lucas will argue that the government already insures some UK exporters against non-payment by their overseas buyers via its Export Credit Guarantee Department, and that the remit of the department should be widened to include domestic orders and broader industries.
Both suppliers and retailers have been left reeling after leading insurers such as Euler Hermes and Atradius slashed cover for the sector last year, deeming it too risky. This has left hundreds of suppliers grappling over whether to self-insure or operate with a depleted order book. In extreme cases suppliers have bank caveats which do not allow them to supply without insurance, leaving them with nowhere to turn.
“Euler Hermes will not insure against good solid businesses like Debenhams, House of Fraser, arcadia“>Arcadia, Bhs or Austin Reed, yet I could go out and insure David Beckham’s right leg or Dolly Parton’s breasts. It is barmy. “
Peter Lucas, chairman, BCIA
Meanwhile, retailers have had the headache of managing pro-forma payment demands from suppliers or, in some cases, worrying about running out of stock.
Lucas, who is also chairman of menswear supplier BMB Group, said: “Euler Hermes will not insure against good solid businesses like Debenhams, House of Fraser, Arcadia, Bhs or Austin Reed, yet I could go out and insure David Beckham’s right leg or Dolly Parton’s breasts. It is barmy. Suppliers want to supply these companies but in some instances they simply can’t.
“We can’t get into this downward spiral. This industry is one of the biggest employers in the country and the government needs to be more supportive. We don’t want to lose jobs over this.”
Drapers is urging suppliers, brands, manufacturers, wholesalers and retailers to support the BCIA’s campaign (see box below), preferably by providing Lucas with examples of where a lack of credit insurance has had a negative impact on businesses. Lucas will present his findings and evidence to Peter Mandelson, secretary of state for business, enterprise & regulatory reform.
The government has come in for heavy criticism of late for picking and choosing which industries to support and which to penalise. Phil Wrigley, chairman of high street chain New Look, has criticised the government for “robbing Peter to pay Paul” - a reference to its plans to hike business rates to 5% next“>next month while ploughing cash into other industries such as car manufacturing.
Last month, speculation emerged that the government was considering a scheme which would see it cover up to 50% of credit insurance payouts, with the insurer covering the rest. However, the scheme was expected to be offered solely to ‘medium-risk’ firms. The BCIA said the government has since backed away from the scheme. Lucas said: “Most insurers won’t touch the sector, so 50% is a damn sight better than where we are now.”
A Department for Business, Enterprise & Regulatory Reform spokesperson said the government understood the problems faced by businesses relying on credit insurance and that it was looking at the issues.
‘Link In’ with the campaign
Drapers supports the BCIA’s initiative and is calling for as many wholesalers, brands, suppliers and manufacturers as well as retailers facing credit insurance issues to join the Credit Insurance Campaign.
This week Drapers set up a group forum on business networking site LinkedInto help unite the industry and give it one voice on this issue and any others facing the supply sector. Sign up to LinkedIn and search for Drapers Wholesale Forumwithin groups or email email@example.com more information on how to join our forum.