The reduction or withdrawal of trade credit insurance has had a negative impact on a significant number of retailers.
According to the British Retail Consortium, 38% of large retailers and 28% of small and medium-sized ones feel that the issue has had a bad effect on their businesses.
The BRC’s latest Quarterly Credit Conditions Monitor also reveals that the vast majority of respondents feel trade credit insurers do not assess risk accurately: 92% of large firms and 74% of small and medium-sized ones believe this to be the case.
One retailer told the BRC that credit insurers “apply industry-wide criteria to individual companies without looking at specific company circumstances. It is easier for the risk assessors to just repeatedly say ‘No cover’ rather than argue for the insured company.”
In the April Budget the government announced the introduction of a temporary Trade Credit Insurance Scheme and has since improved some elements of it. But almost all retailers surveyed believe this has not gone far enough, saying that the top-up scheme had yet to help their businesses.
To make a real difference the BRC believes eligibility for the top-up scheme cover period must be extended back to April 1 2008, when insurers started to remove cover as the downturn began. The current cut-off date is October 1 2008.
In addition, 77% of large retailers and 59% of small and medium-sized ones believe the scheme should be extended beyond December 31 2009, when it is due to end.
Tom Ironside, the BRC’s business environment director, said: “It’s vital to retain trade credit insurance – especially in the important run-up to Christmas period and beyond.
“If trade credit insurance is withdrawn, suppliers demand to be paid up front. This can cause cash flow problems for retailers, leading them to cut jobs and stock as they divert money to pay suppliers.”