The research was conducted in July to help understand the main concerns of business leaders following COVID-19 and two thirds (63%) of executives interviewed said they are expecting an increase in bad debts and a third (30%) say customer insolvencies are now a major threat to their business. Business decision makers are also concerned about the impact of supplier chain insolvencies with a similar number (28%) saying these are also now a major hazard to the success of their own business.
The survey revealed that this is an issue across most business sectors, however bosses working in technology (80% of all directors), hospitality (73%) and marketing (67%) are those that most expect to see a rise in bad debts, reflecting how significantly their customers and suppliers have been impacted.
Supplier availability was additionally highlighted as an issue with 35% of all businesses citing this a concern, rising to 59% of bosses in construction and 50% in food and drink businesses, reflecting their high reliance on the supply chain.
Tim Fisher, Managing Director of Trade Credit at Gallagher, said: “Clearly the last few months have significantly impacted the outlook for the economy and business owners are rightly concerned that either from a customer or supply chain perspective their business is at an increased risk of becoming victim to bad debts. Problems with debts are unfortunately a natural element of business, however directors can take steps to protect them and their business against them by utilising trade credit insurance, which protects businesses against insolvencies and late payments.”
Despite these concerns, many executives said COVID-19 had made them rethink their offering with a third (31%) expanding into new product areas, demonstrating the resilience of British industry. Innovation was particularly rife in sectors including marketing (60%), technology (50%) and manufacturing (49%).
Tim, added: “It’s great to see that businesses are adapting and entering new product areas to help their business move forward. In tough economic times innovation is key to growing and maintaining a strong balance sheet. However, many of these businesses may be taking a step into the unknown which inherently comes with an added element of risk. To help alleviate these risks and assist growth business owners should consider the use of trade credit to support trade with unfamiliar customers or markets.”
Trade credit insurance protects businesses against customers failing to pay for goods or services usually due to insolvency or lack of funds and can help protect against costs due to failures in the supply chain.
Different trade credit solutions will suit different businesses. Many businesses opt to work with Gallagher’s experienced credit risk insurance specialists to plan and implement a tailored, competitive credit insurance policy covering a wide range of risks.
Gallagher also offers a fully automated invoice insurance solution, designed to protect SMEs against insolvent and late paying customers. Through a partnership with Nimbla, Gallagher is able to arrange single invoice cover for clients, allowing firms to insure specific invoices or projects, rather than a traditional yearly policy.
A simple online platform allows clients to instantly review the credit rating of their customers and insure projects or invoices individually, helping safeguard the business against non-payment in the event of insolvency. Cover can be purchased for invoices up to a maximum of £110k per invoice or £500k per customer.
To discuss your trade credit insurance requirements please contact Tim Fisher or speak to your usual Gallagher representative.
This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as 23/07/2020, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher. FinProms reference FP863-2020/23/07/2021
All data unless otherwise stated from research conducted by Opinium on behalf of Gallagher, between 26 June and 3 July, amongst 1008 senior decision makers in businesses employing over 250 people.
