Who would have thought that trade credit insurers would think twice about agreeing credit limits on Morrisons & Asda!
You would imagine that obtaining insurance on these giants of retail wouldn’t be an issue.
However, currently most trade credit insurers have little enthusiasm to add to existing capacity and are asking policyholders to trim their insured credit limits down to actual requirements. The background to this situation is that private equity-backed businesses piled high with debt are suffering now that interest rates have returned to realistic levels. We aren’t suggesting that Morrisons & Asda will fail tomorrow, but we have in the past witnessed the demise of Debenhams and the House of Fraser.
High interest rates, supply chain inflation, the cost of living crisis, and people voting with their feet have left both of these well-known supermarkets looking for a change of strategy to turn around their fortunes. This is not going to be an easy or quick fix. It’s not only the UK that is feeling the pressure, as evidenced by the recent announcement of Groupe Casino (the mass market retail group) in France to enter a form of creditors arrangement to buy them time to restructure. The headline to this blog may not have caught your attention as the chances are you don’t supply either of these retail giants. However, when was the last time you considered the financial strength of your top customers?
