Trade credit insurance hurting retailers

Retailers being refused trade credit insurance is leading to problems in the industry, especially for small to medium-sized businesses, the British Retail Consortium (BRC) warns.

The failure of Woolworths and MFI can, in part, be blamed on the companies’ lack of trade credit insurance, which covers suppliers against retailers not paying for stock.

According to the BRC, the lack or withdrawal of these policies is increasing and especially affecting small to medium-sized businesses.

Retailers often pay for stock on credit and the supplier than takes out insurance in case of a firm’s failure to pay.

A spokesperson for the BRC says: ‘Insurers ought to be looking at the approach they are taking, because they were happy to take the premiums in the good times and they are now pulling the rug from under retailers.’

The representative added that some retailers in difficulty have had to pay cash up front and run up larger debts.

Malcolm Tarling, a spokesperson for the Association of British Insurers, says insurance cannot cover some businesses, such as situations where banks have withdrawn credit and the company is likely to fail.

Earlier this week, Stephen Robertson, the director general of the BRC, said the VAT cut from 17.5 to 15 per cent was a “modest but welcome boost” for retailers.

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