UK retailers have called on the government to extend its Trade Credit Insurance Scheme in order to fill the gap left by private insurance companies, who have increasingly refused to offer credit insurance.
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According to figures released by the British Retail Consortium today (20 October), a significant proportion of retailers – 38% of large retailers and 28% of SME ones – reported that the reduction or withdrawal of trade credit insurance had negatively impacted their businesses.
“If trade credit insurance is withdrawn, suppliers demand to be paid upfront. This can cause cash flow problems for retailers, leading them to cut jobs and stock as they divert money to pay suppliers,” Tom Ironside, BRC business environment director, explained.
The concern among the retail industry is that trade credit insurers fail to accurately assess risk and therefore refuse to provide insurance, even when there is little grounds to do so.
One retailer said credit insurers apply “industry-wide criteria” to individual companies without looking at specific circumstances.
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By GlobalData“It is easier for the risk assessors to just repeatedly say ‘no cover’ rather than argue for the insured company.”
In its April Budget, the UK government announced the introduction of a temporary Trade Credit Insurance Scheme to plug the hole left by insurers. However, almost all retailers surveyed believe this has not gone far enough, with 95% of SMEs and 85% of large retailers responded that the top-up scheme had yet to help their businesses, the BRC revealed.
BRC argued that eligibility for the top-up scheme must be extended back to 1 April 2008, when insurers started to remove cover as the downturn began. The current cut-off date is the beginning of October last year.
Additionally, the majority of retailers believe that the scheme, which is due to end on 31 December, should be extended beyond this date.
“The top-up insurance scheme is due to finish at the end of this year and VAT is returning to its higher level at the same time. To prevent the retail recovery and the three million jobs provided by the sector being undermined, the top-up scheme must be retained into 2010,” Ironside concluded.
