Suppliers could start demanding payment up front from the struggling department store

Insurers have reportedly put the squeeze on struggling department store Debenhams by cutting the level of cover offered to its suppliers.

According to The Sunday Times, Euler Hermes is understood to have significantly reduced its credit insurance cover for the suppliers.

Atradius and Coface are also said to have refused cover in the last few days.

The actions of the insurers could pile the pressure on Debenhams, which last month announced an expected annual profit of £35-40m – against a City forecast of £50.3m.

Difficult time for Debenhams

Credit insurance protects suppliers against the risk of a customer going bust between the customer making an order and the payment for the order being completed.

Without sufficient credit insurance, suppliers often demand payment upfront, potentially creating a cash crisis for the department store.

The news comes at a difficult time for Debenhams.

Last month it issued its third profit warning this year and announced plans to sell Danish department store Magasin du Nord and put printing firm Magenta up for sale to raise funds.

Only five years ago Debenhams made £150m.

A spokesperson for Debenhams said: “Debenhams has a healthy balance sheet and cash position. All the credit insurers continue to provide cover to our suppliers and we maintain a constructive relationship with them.

“It is well-documented that market conditions are challenging, but Debenhams continues to be profitable, has a clear strategy in place and is taking decisive actions to strengthen the business‎.”

Euler Hermes, Coface and Atradius were all contacted by Insurance Times for a response to the article, but would not comment on individual customers.