Credit insurance firm Coface is growing increasingly concerned with the UK retail sector, seeing fashion and electronics retailers demonstrating the most worrying behaviour. The insurer has already withdrawn its credit insurance from companies that supply sportswear company JJB Sports and high street chain Woolworths.
“The economic environment is changing rapidly and we have had to change our approach,” Ian Hollyhomes, credit insurance director at Coface tells GTR.
The insurance market is also growing jittery over the investments in the UK high street made by the Icelandic group Baugur, and Hollyhomes confirms it has withdrawn cover for suppliers to some Baugur-owned high street firms.
This decision is in light of the fall in consumer spending reducing retail sales and problems afflicting the Icelandic banking sector. As evidence of the economic decline facing the country, its stock exchange reopened on Tuesday after a three-day suspension and stocks plummeted by 77%.
Hollyhomes makes it clear that Coface will continue to provide cover for all sales up until the date of withdrawing its cover, and in some cases, depending on the nature of the contract, cover will continue for a subsequent three to six months.
Other sectors in the UK showing potential cause of concern include the construction industry, excluding construction projects in the public sector. Suppliers of caravans, conservatories, and other non-essential products that tended to grow during more prosperous economic times, are also being closely monitored, as are those companies that supply the components that support these industries.
“We are increasingly monitoring our exposures, and noting worrying signals, such as outstanding payments, on individual companies,” adds Hollyhomes.
JJB Sports saw its share price fall by 25% on Monday following Coface’s decision, and the firm is now reportedly in talks to sell off some of its “non-core assets”.
Trade credit insurance can play a vital role in a retailer’s supply chain, helping cover suppliers’ risk of non-payment once goods have been dispatched. In the current economic climate demand for cover is likely to be heightened. Insurers are also seeing rising demand from their exporting clients for political risk cover, as they are looking for ways to increase their borrowing capacity as credit in the market continues to dwindle.
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