An estimated £250m worth of unrecoverable invoices owed to suppliers could go unpaid
Invoice insurer Nimbla is calling on the government to extend Trade Credit Insurance Reinsurance Scheme following the retail empire Arcadia Group – the owners of Topshop allegedly facing collapse.
Nimbla provides B2B invoice insurance to UK SMEs, it estimates that £250m worth of unrecoverable invoices owed to Sir Phillip Green’s Arcadia’s suppliers could go unpaid.
Arcadia which also owns Dorothy Perkins, Topman, Miss Selfridge, Outfit and Burton could fall into administration putting 13,000 jobs at risk.
This is why Nimbla is calling on the government to extend trade credit insurance to protect businesses from the impact of the economic downturn that the pandemic has caused.
And this could have a ripple effect, threatening the livelihood of hundreds of SMEs further down in the supply chain.
In a statement Arcadia said: “We are aware of the recent media speculation surrounding the future of Arcadia.
”The forced closure of our stores for sustained periods as a result of the Covid-19 pandemic has had a material impact on trading across our businesses.
“As a result, the Arcadia boards have been working on a number of contingency options to secure the future of the group’s brands.
”The brands continue to trade, and our stores will be opening again in England and Return on Investment as soon as the government Covid-19 restrictions are lifted next week.”
Meanwhile, Flemming Bengtsen, chief executive at Nimbla said: “SMEs are in a precarious position; heavily leveraged and unable to withstand further stress to their business.
”They require their suppliers to offer credit terms as they cannot borrow more and in equal measure, they cannot afford for their debts to go unpaid.
“The average amount of bad debt SMEs said would tip them into insolvency was £30k before Covid-19. That number is undoubtedly much lower now. Arcadia sadly is just the tip of the iceberg as many more defaults can be expected in 2021.”
This scheme is set to end on 31 Dec 2020.
Bengsten continued: “The much-needed injection of cash into UK businesses via Coronavirus Business Interruption Loan Scheme and Bounce Back Loan Scheme has succeeded in staving off insolvency for many SMEs.
“However, it has also created a wave of “zombie” companies that have little realistic chance of survival. Arcadia’s collapse highlights the danger of a domino effect as defaults on trade credit trigger others to fail. We estimate as much as £250m of unsecured debts will be left behind to Arcadia’s suppliers.”
Nimbla has issued some guidelines for SMEs trading on credit – engage with trading partners, check customer credit ratings frequently as conditions are fast moving , stay on top of debts, for overdue payments buyers should start a repayment plan and to consider insurance.