Over the last few weeks we’ve all heard the figures surrounding the devastating Carillion saga. £1 billion trade debt, almost £0.5 billion pension gap, and the direct threat to thousands of jobs (20,000 employees and up to 100,000 in the supply chain).
But what of the estimated 30,000 suppliers and subcontractors who are owed money by Carillion? Inevitably, some will be strong enough to trade through the bad debt, but others will not. And the domino effect will of course be that in turn creditors of those companies will find themselves in a similar difficult situation.
Staggeringly, the Association of British Insurers said that it believed only £31 million of the £1 billion would be paid out by trade credit insurers to firms in the Carillion supply chain. So, we can conclude that only an estimated 3% of the trade debt was insured by suppliers and sub-contractors!
It is a shame that such a high profile liquidation has had to occur in order to really shine a light on the very real dangers which exist for companies of all sizes across all sectors. The risks of unsecured/uninsured trading are real. They exist on a daily basis and the more you trade without insurance, the greater those risks become.
One of the first things you do when you buy a new car or house is insure it in order to protect your investment and protect yourself from any unforeseen costly circumstances which may arise. So, why would you spend years building a successful business while offering credit to customers without protecting that debt and removing the risk of non-payment?
You could be the best manager in the world, running an efficient and thriving business, but you cannot control your customers operations, or predict when customers will not fulfil payment. In an interview with one of the Carillion suppliers, the supplier stated that he felt it must be safe to do business with Carillion because the government was awarding them contracts and he assumed the government must carry out appropriate due diligence. There is no certainty or guaranteed payment, but you can seek to minimise such risk.
Last week the Insolvency Service reported that over 17,000 companies entered insolvency in 2017, a rise of 4.2% on the previous year. They also recognised that the impact of Carillion’s demise is also likely to greatly influence the 2018 figures for bankruptcy. So, what if you supply one of the 17,000 companies? Indeed, without credit insurance, you may be risking being one of the 17,000.
This WAKE UP call goes out to all sectors. Such risks are not confined to the Construction and related industries. Other recent high profile insolvencies include Palmer & Harvey, the retail distributor, which collapsed in November with debts of over £700 million.
Whatever your sector, talk to us today. We provide the expertise to select and manage the best policy for your business, enabling you to reduce risk, protect your company, improve market and customer intelligence, improve bank facilities, improve cash flow and trade robustly with confidence.