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Extend trade credit Top-Up say retailers
Oct '09
38 per cent of large retailers and 28 per cent of small and medium-sized ones report the reduction or withdrawal of trade credit insurance has negatively impacted their businesses.

The results are part of the British Retail Consortium's (BRC's) latest Quarterly Credit Conditions Monitor, published today (Tuesday). The vast majority of respondents feel trade credit insurers do not assess risk accurately: 92 per cent of large firms and 74 per cent of SMEs believe this to be the case.

One retailer said 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. 95 per cent of SMEs and 85 per cent of large retailers responded 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 1 April 2008, when insurers started to remove cover as the downturn began. The current cut-off date is 1 October 2008.

The top-up scheme is due to end shortly – on 31 December 2009. 77 per cent of large retailers and 59 per cent of SMEs believe the scheme should be extended beyond this date.

Tom Ironside, BRC 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"If trade credit insurance is withdrawn, suppliers demand to be paid upfront. This can cause cash flow problems for retailers, leading them to cut jobs and stock as they divert money to pay suppliers.

"Retailers are far from convinced that insurers accurately assess trade credit risks. The Government must put pressure on these companies to ensure proper research is undertaken so more accurate underwriting decisions are made.

"The Government has made an attempt to help retailers through its top-up scheme. But to make a real difference eligibility, needs to be extended to April 2008 – when the cover started to be withdrawn. 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."

British Retail Consortium

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