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UK insurers pull the plug on some top retailers

Retailers in the UK have had their insurance cover reduced or withdrawn altogether as they battle slumping sales and profits. Insurance providers are reducing or withdrawing cover from some of high streets’ biggest names like The Original Factory Shop, New Look and House of Fraser.

However, many suppliers and retailers feel the risk-averse attitude is crippling the industry. Reducing credit insurance can shake suppliers’ confidence in a business. Credit insurance is based on audited accounts. So if retailers are having a tough time, insurers feeling that the business isn’t healthy reduce exposure. And the moment credit insurance is removed, confidence in the business is shaken.

It is like a self-fulfilling prophecy. When retailers have credit insurance pulled, they have to convince existing suppliers and induce them to stay on, but chances of finding someone new get drastically reduced. The lack of confidence that credit insurers show starts to echo or get magnified and can cause problems for retailers. Even those that are still solid businesses can find themselves facing a cash crunch.

Suppliers start treating retailers with caution. They do a risk assessment and look at the volume of business going through. In some instances they totally stop working with a customer. Sometimes they look at payment plans and take a risk.

 
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