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Indies tell of credit squeeze pain

Caroline Nodder

It seems fitting somehow that in the week former RBS boss Fred Goodwin is stripped of his knighthood, we on Drapers are taking a look at some of the long-term repercussions for the fashion sector of the credit crunch.

It seems fitting somehow that in the week former RBS boss Fred Goodwin is stripped of his knighthood, we on Drapers are taking a look at some of the long-term repercussions for the fashion sector of the credit crunch.

Four years ago, not only was Goodwin’s bank handing out mortgages to just about anyone with a pulse, but banks and insurers were being equally generous to the fashion retail sector and its associated suppliers. Credit insurance in a world where no one is going bust is easy to come by and rarely cashed in, but now, as casualty after casualty hits the financial wall, the same insurance is not only desperately needed, but also very hard to secure, according to our sources. It’s an issue that can have a huge impact on indies particularly, leaving them with poor credit terms and a major cash-flow problem.

Drapers this week teams up with Rochdale MP Simon Danczuk, who has been examining the issue on behalf of indies, to survey almost 250 of them. The results make for interesting reading and we will be passing them on to the Government.

Our analysis of the results and some of the comment from the sector reveals the vicious circle the credit problem breeds. Brands concerned about insurance are playing it safe and imposing tougher terms on indies, who in turn play it safe with orders and product to ensure sell-through.

But by playing it safe, by not taking risks with new brands or product, the business goes stale and loses custom. You can’t blame all indie business failures on this – some are just badly run – but when taking risks in a downturn is arguably the only way to fight your way out, anything that makes that more difficult is a serious problem.

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