The British Retail Consortium said Whitehall’s proposal to guarantee medium-risk companies only – those whose cover has been cut but not withdrawn – would leave many otherwise healthy retailers “out to dry”.
BRC director of business environment Jane Milne said the proposal was “good progress” but added: “We understand Government doesn’t want to take on bad risk, but if the removal of cover is not down to a fundamental flaw of the retailer then a more flexible approach is needed.”
Withdrawal or reduction of credit insurance has stung many retailers, including Empire Direct – which went into administration this week – Woolworths and Land of Leather.
The Department for Business, Enterprise and Regulatory Reform has been in talks with the Association of British Insurers since December. It laid out plans to offer medium-risk retailers a guarantee of up to 50 per cent and an announcement on the proposal is expected in the coming weeks, said a spokeswoman.
Under the proposal, credit insurers will run the schemes for the Government, which will use insurers’ risk management business models to determine which companies qualify for cover.
Business secretary Lord Mandelson accused credit insurers of “overreacting” to the downturn. He said he is “very concerned” about companies being placed in “immense financial distress” as suppliers stop providing goods because they have had their credit insurance removed.
The French government runs a credit insurance scheme, but it differs to the UK proposal as it acts as insurer as a last resort.
But credit insurer Euler Hermes said: “We would fail to deliver our best service to our clients if we were not to advise them to be extra cautious.”
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