Smaller wholesalers are being forced to pay suppliers upfront for deliveries because their trade credit insurance limits have been reduced or removed.
Sources within the sector claimed wholesalers were coming under closer scrutiny from trade credit insurers who were readjusting limits in response to the deepening global economic crisis.
The claims follow reports in The Grocer last week that wholesalers were at risk of being driven out of business by increased bank charges. Wholesalers had complained banks had pushed charges up to levels they were unable to pay, with one wholesaler claiming his charges had increased as much as £30,000.
“Quite a few smaller wholesalers are seeing their trade credit insurance limits reduced, or even having their insurance withdrawn, forcing them to pay suppliers upfront for delivery,” said an industry source.
One risk underwriting manager admitted there had been an increase in the number of smaller wholesalers whose trade credit limits had been readjusted.
“Smaller wholesalers, especially those not linked to a buying group, do not have the bargaining power of the major multiples. In turn, suppliers are also being squeezed,” he said.
Suppliers were sympathetic to wholesalers who had found themselves in this position, an industry source said, but they just couldn’t take the risk of supplying on normal terms to uninsured wholesalers.
The MD of a leading wholesaler added: “We understand underwriters are reviewing the level of exposure they have in all channels but, to be fair, it is not the suppliers, as they are merely advised by the underwriters.
“This could be interpreted as another example of the financial industry reinforcing its position, but in fact it is probably doing what it should have been doing all along,” he added.
Trade creditors were wary because instances of default were increasing in all sectors of the grocery industry, said another leading wholesaler.
Sources within the sector claimed wholesalers were coming under closer scrutiny from trade credit insurers who were readjusting limits in response to the deepening global economic crisis.
The claims follow reports in The Grocer last week that wholesalers were at risk of being driven out of business by increased bank charges. Wholesalers had complained banks had pushed charges up to levels they were unable to pay, with one wholesaler claiming his charges had increased as much as £30,000.
“Quite a few smaller wholesalers are seeing their trade credit insurance limits reduced, or even having their insurance withdrawn, forcing them to pay suppliers upfront for delivery,” said an industry source.
One risk underwriting manager admitted there had been an increase in the number of smaller wholesalers whose trade credit limits had been readjusted.
“Smaller wholesalers, especially those not linked to a buying group, do not have the bargaining power of the major multiples. In turn, suppliers are also being squeezed,” he said.
Suppliers were sympathetic to wholesalers who had found themselves in this position, an industry source said, but they just couldn’t take the risk of supplying on normal terms to uninsured wholesalers.
The MD of a leading wholesaler added: “We understand underwriters are reviewing the level of exposure they have in all channels but, to be fair, it is not the suppliers, as they are merely advised by the underwriters.
“This could be interpreted as another example of the financial industry reinforcing its position, but in fact it is probably doing what it should have been doing all along,” he added.
Trade creditors were wary because instances of default were increasing in all sectors of the grocery industry, said another leading wholesaler.
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