Suppliers of vital goods such as non-perishable food produce and medical supplies are at risk of having insufficient trade credit insurance as some British firms such as retailers and manufacturers begin stockpiling goods amid mounting concerns of a no-deal Brexit, according to Marsh.
Traditionally, buyers purchase goods on credit terms before selling them on to the consumer and using some of the revenue to pay the supplier before the terms of payment expire.
Marsh says that by stockpiling goods, buyers may be unable to generate enough revenue to cover the credit, which greatly increases the risk of non-payment.
If suppliers increase the quantity of goods sold to buyers in the UK, they should check they have adequate levels of trade credit insurance to protect them against any payment default, states Marsh.
“Stockpiling could reduce cash flow and tie up liquid funds that could otherwise be reinvested into growth, research and development,” says Tim Smith, Global Trade Credit Practice Leader, Marsh.
“It also creates further financial burden by potentially forcing firms to increase their spending on storage, in order to house their growing inventories.”
“Credit insurance is a proactive policy which not only pays out in the event of non-payment, but also allows suppliers to make informed decisions about their customers by drawing on the market and economic expertise that credit insurers hold.”