Your browser is no longer supported. For the best experience of this website, please upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We use cookies to personalise your experience; learn more in our Privacy and Cookie Policy. You can opt out of some cookies by adjusting your browser settings; see the cookie policy for details. By using this site, you agree to our use of cookies.

'Pushback coming' from UK's high street suppliers

Administrations, company voluntary arrangements (CVAs), credit insurance cuts and factories demanding upfront payments are all putting unbearable pressure on suppliers in an already-stretched market, industry sources have told Drapers.

Suppliers said the series of recent high-profile CVAs – including the planned restructuring at House of Fraser, which will be voted on by creditors on 22 June – have led to a “crossroads” in the industry.

“Will there be any suppliers left?” said one high street supplier. “There needs to be a huge reality check.

“To survive this type of market, you need an astonishing balance sheet. It’s been one-way traffic and the supply base can’t take it any more.”

Another supplier agreed: “If you continue to squeeze your suppliers, you won’t have any. It’s a case of ethics and we’re at a real crossroads. Retailers are going through the hardest time since the 1980s and it’s tough, but what will be the future shape of manufacturing?”

One manufacturer said a “pushback” is coming, as many suppliers are reluctant to continue working with UK retailers: “There is a feeling among myself and other suppliers that we won’t continue to supply some UK retailers.

“What are the terms of business to supply them? We need to look very closely at this.”

One womenswear manufacturer said credit insurers cutting cover is having a crippling effect: “The industry is now becoming uninsurable. Credit insurers are cutting levels or exiting altogether. In China, a lot of factories won’t work with the UK unless they’re paid a minimum 30% deposit and balance on delivery.”

Another supplier added: “We’re acting as a bank and we take all that risk on board. Banks are not lending in this industry – they’re nervous. The risk factor is huge.”

Industry sources have said the law needs to be changed to give more protection to the retailer supply base.

“Lots of manufacturers are closing down,” one source said. “This is the hard, commercial reality and it stacks up in the retailers’ favour.

“The manufacturer has no protection. We are stuck in a hole. CVAs are the hot way of working at the moment – instead of being honourable and trying to work with partners.”

Another manufacturer agreed: “We take responsibility for the fabric, the sourcing, we deal with the couriers and we have a lot of commitments. So when a company goes into administration, we are caught with all the stock.

“Sometimes the brand just disappears and there’s not much we can do. Who is going to stand up for our industry and say this is wrong?”

David Steinberg, partner in restructuring and insolvency practice at Stevens & Bolton, said: “There is a risk for suppliers, undoubtedly. The fact they are purchasing from a manufacturer and supplying to a retailer puts them in a vulnerable position.

“Credit insurance is popular but expensive and it gets pulled at short notice. The reality is for the creditor population, if they have a claim against a company, it will also owe money to the banks. The banks are first in line.”


Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.