House of Fraser: should suppliers to the retail sector be concerned?

September 21, 2018
Stuart Grice – Head of Trade Credit, Howden

Since the recent demise and subsequent appointment of EY as administrators of House of Fraser it has become apparent that their retail supply chain has been badly hit. But could this have been avoided?

While some suppliers were aware that the risks were increasing, many continued to supply the business goods and services on open credit terms. Trade publication Drapers, put forward that many suppliers to House of Fraser may face big debts as the department store chain is not legally obliged to pay for good sold before they were purchased by Sports Direct. What is more, payment failure for these transactions could “push some smaller business over the edge.”

In contrast, credit insurers have been acting to help House of Fraser suppliers avoid trading losses through the sharing of information and insured businesses are now starting to make claims on their policies.

Stuart Grice, Executive Director, Howden Trade Credit commented:

“The problems were well documented in the build-up to the failure. However, we are aware that credit insurers continued to support their clients, with some insurers still on cover as late as July. House of Fraser actioned a Pre-Pack Administration, with a sale to Sports Direct concluded almost simultaneously. Subsequently, suppliers have been contacted to inform that they are only likely to paid for money due after the administration. We believe the total supplier debt to be in the region of £60m, with press comment that only 3p in the Pound will be paid.”

Suppliers in the retail sector should consider how they can best protect their account receivables in this precarious marketplace. A credit insurance policy could help you avoid the inherent trading risks of open credit while maximising your business’ growth potential; not only will credit insurers alert you to high risk customers, they will also suggest alternative suppliers that will better support profitable trading.

For large businesses, having detailed market insight is integral to identifying potential threats before they occur. As part of our credit risk analysis service at Howden, we provide regular market reports which provide the tools and guidance needed to take advantage of trends, be aware of risks and exploit future opportunities.

Hear more on how credit insurance could help your business trade safely with customers in retail and other sectors at Rimilia’s Dynamic Credit Management workshops in October where Stuart will be speaking along with a host of other industry experts. Learn more and register your free place today: